I'm considering taking an early IRA withdrawal. In order to make my decision, I want to figure what it will cost me in taxes. My understanding is that I treat the withdrawal as ordinary income and figure the tax as usual, then take 10% of the withdrawal amount and add that on for the early withdrawal penalty. Is this correct?I was poking around the "Fool" looking for discussions about early withdrawals. The following is from the Fools "All about IRAs" at http://www.fool.com/money/allaboutiras/allaboutiras01.htmMoney may be withdrawn from an IRA at any time, but on withdrawal it will be taxed at ordinary income tax rates. Except as noted below, withdrawals from an IRA other than a Roth or Education IRA prior to age 59 1/2 will result in a 10% excise tax in addition to ordinary income tax. If nondeductible contributions are made, a percentage of them will be excluded from taxation at withdrawal. How is that percentage calculated? Well, those contributions are divided by the sum of that withdrawal plus the total IRA balance as of December 31 of the year of withdrawal.As examples, a $10,000 withdrawal from a IRA account with an end of year balance of $20,000 would get an exclusion of 33% or $3,333. Make the same withdrawal from an IRA with a $500,000 balance and the exclusion is roughly 2% or $196.As a huge disclaimer - I'm just an innocent taxpayer trying to work my way through the tangled web. I'm hoping qualified advisors will comment on this rule.Regards,Carl
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