If he took money from a taxable retirement account, it doesn’t matter that it was held there in a cash account. It only matters that when he took it from the plan, it was considered taxable as income. The IRS didn’t make up that you earned 50k because you used the “IRS Tool.” Rather, it’s the reality that he withdrew taxable assets. So 21 + about 20 does equal about 41-42k. Plus your earnings, which are assessed a little differently.
In FA, and in taxes, income doesn’t just mean job wages.