IRA penalties?

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  • Kram BergGold
    Senior Member
    • Jun 2006
    • 2112

    #1

    IRA penalties?

    When an IRA or Roth IRA contribution is removed before the deadline, only the income is taxed. However it seems you have to pay a 10% penalty on this income. True?
    I wonder why this is? Nothing was gained by the taxpayer.
    If this is correct, it is a good reason to recharacterize rather than withdraw.
  • newbie
    Senior Member
    • Nov 2006
    • 333

    #2
    But you are gaining the interest income, so to me it seems correct. Why are you w/drawing funds or how would you recharacterize?

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    • Kram BergGold
      Senior Member
      • Jun 2006
      • 2112

      #3
      recharacterize

      My client removed the contribution and earnngs from his Roth IRA. He could have and should have recharacterized it to a non dedcutible Traditional IRA.

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      • lbbwest
        Member
        • Apr 2007
        • 39

        #4
        It isn't income.

        It's a recharacterization. It won't be taxed until retirement funds are withdrawn.

        Comment

        • Kram BergGold
          Senior Member
          • Jun 2006
          • 2112

          #5
          not a recharacterization

          He eremoved the funds from the Roth and put them into his bank acct. He did not recharacterize by putting the funds into a traditional IRA.

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