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<<I unfortunately had to quit work, and live off of my retirement.>>

Sorry to hear that. I hope things get better for you.

<< I was of coursed penalized 10 percent and 20 percent was withheld for taxes. I was diagnosed as manic-depressive and was declared disabled. Since, IRAs can be withdrawn without penalties for disabilities or major medical, how can I recover the 10% that was with held, and can the taxes be recovered as well?>>

There shouldn't have been a 10% withholding. There should only have been a 20% withholding. And, if you qualify for the penalty relief, you would simply complete Form 5329 and attach it to your tax return.

You'll get your withholding back (or not) when you file your tax return for the year in question. You'll simply report your withholding as you do any other withholding.

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