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My husband and I withdrew about $4,700 from his IRA to cover a 5% downpmt on an $83,500 house (houses are easier to buy in Indiana than a lot of places!). We withdrew the extra to cover the taxes on the amount withdrawn.

We're closing tomorrow, and the actual we amount we'll be paying at closing after all the math is done will be just under $2,300 (the sellers are paying $1500 in closing costs, we get $800 in prorated taxes, etc.).

Is this a big "oops"? Was the first "oops" withdrawing more than we actually needed for the downpayment? Can we still avoid the 10% penalty? Do we need to sit down with a tax accountant now?

OK, when did you withdraw it? Can this qualify as a first house? ie Did either of you own a home within the past two years? If you're lucky you may meet the first homeowner's exemption, but people usually aren't that lucky. See page 20 of IRS Publication 590 to see if you meet those "first homeowner rules" otherwise, you owe the penalty.

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