Dear Sir,



My friend has referred me to ask you this question as you being expert for Forign nationals..



On Feb 13th 2007 I have withdrawn $15000 ( check cut) from $,19.186.89 after fedility deducts taxes etc, thinking to buy home immedialty with out doing much research on penalities. Finally bought first time home in Sept 2007 paying down payment of $9000 from my amount.



Now I am filling taxes and question is can I claim $9000 as exemption from 10% penalty.

I would appreciate your help in this matter.



REgards

Srini

No, you are liable for the 10% early withdrawal penalty on the withdrawal of $19186, unless you are 59-1/2 years old (or 55 and retired from service).

The law permits making an inservice withdrawal for use in making a first home purchase. However, it doesn't waive the penalties for doing so. So you will need to pay $1919 in penality. In addition, the $19187 will be added to your income for 2007 and then your total income will be used to determine your tax liability. The $4K that was withheld is used to offset your tax liability the same way as your salary withholding, but it doesn't represent the actual taxes due.

Scott, Thanks for your reply. But in many places I have seen that first time home buy aamount can be excempted for penality. Some sites show if I withdraw from from IRA then no penality. Since I have withdrawn from 401 plan directly, does I need to pay panalty?

The first time home buyer waiver applies to IRAs not 401Ks.