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Posted

Client took mucho money out of IRA in late 2007 for first home purchase. No, she did NOT check with me first.

She paid the early withdrawal penalty on all but $10K with her 2007 taxes, and paid income tax on the total. She ended up NOT finding a house within the time limits (which expired in first quarter 2008). So now she owes penalty on the $10,000 as well. But it was all on the 1099-R for 2007.

Any better way to handle this in ATX besides putting the penalty amount on Line 1 of the 5329 and then adding a statement explaining why this amount is not included in income?

Thanks.

Catherine

Posted

How about amending 2007? I'm not sure how this was done to not have the IRS assess the additional penalty anyway and send a notice....or maybe enough time hasn't passed for the 2007 notices yet.

Julie

Posted

How about amending 2007? I'm not sure how this was done to not have the IRS assess the additional penalty anyway and send a notice....or maybe enough time hasn't passed for the 2007 notices yet.

Julie

But the 10% penalty wasn't due in 2007 -- the client had until March of '08 to find a house before the early withdrawal penalty kicked in on this last portion. Therefore, it's a penalty due in 2008.

Catherine

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