I am considering early withdraw of one of my trad. IRA's. I have the option of having the 10% penalty with-held or not, from the withdrawal. When is this federal 10% penalty due (at point of withdrawal or April '09) ? Thank You

AtlantaTaxExpert

The 10% Early Withdrawal Penalty applies in the year you do the withdrawal.

However, you ALSO PAY TAXES on this money.

WHY are you withdrawing it??

teamvettered

to pay off some c.c. debt in order to improve credit score in order to purchase a home. have been renting since moving to Florida 2-years ago. Housing market is still falling and dont plan on buying til "09 but want to clear up income to debt ratio. If penalty (& obviously taxes) are not due til "09 the Full amount of ira will be put to better use on a 20% c.c. for a year than if i have them with hold for me and without the c.c. pymt each month i will be able to accumulate the $ for tax time by next year.

AtlantaTaxExpert

Find another way to pay down the credit card debt.

You CAN withdraw $10,000 for the purchase of a home and avoid the 10% Early Withdramal Penalty, but if you withdraw money to pay off credit cards, expect to pay AT LEAST 25% of the money on taxes.