401K and income tax

My understanding is that if you want to get money out of your 401K before you reach the age of 59, the money you get out will be considered as your regular income and therefore you have to pay income tax. In addition, you need to pay 10% penalty. My question is:

1. When you pay income tax on the money you withdraw from you 401 K, will the tax rate be determined based on the income you have the year you withdraw the money or the year you put the money in?

2. If the answer is the later one, does that mean you only need to pay 10% tax penalty on the money you withdraw from 401 K if you have no income at all that year?

Thanks!