IRA penalties?

[Kram BergGold]

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]

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

[Kram BergGold]

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.

[lbbwest]

It isn't income.

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 It won't be taxed until retirement funds are withdrawn.

[Kram BergGold]

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.