Do you still have to pay taxes on the twenty percent withholding from your distribution of your old 401k?

YES the taxable amount of the distribution is added to all of your other gross worldwide income on your 1040 federal income tax return and taxed at your marginal tax rate.

If you are under the age of 59 1/2 and you do NOT meet any of the exemption form the 10% early withdrawal penalty then the 10% early withdrawal penalty will also apply to the taxable amount of the distribution.

You will get a credit for the 20% amount that was withheld from your distribution amount as an advance payment of any possible taxes that would be due. When your 1040 federal income tax return is completed correctly the withheld amount will be entered on page 2 of the 1040 income tax return line 61 Federal income tax withheld from Forms W-2 and 1099 line 61 $$$$ amount.