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1. Did I hear right?

No. Unless there were nondeductible contributions to the traditional IRA, everything withdrawn is taxable income and, in your case, subject to the 10% premature distribution penalty.

2. If so, how and where do we report the withdrawal on our (filing joint) 1040. I'm using Turbo Tax Deluxe 2000 to do our taxes and am unsure where I should go in the program to report this?

3. If what I heard is wrong, how do we report the withdrawal on our 1040 and are we subject to the 10% early IRA withdrawal penalty?


TurboTax will ask about 1099-R's in the retirement income section of the interview. (At least I think that's where it is. It will ask you if you go through the entire interview.) Answer its questions, and you'll wind up with the gross amount of the distribution on line 15b, 10% of the gross distribution on line 54 with the word "NO" on the dotted line, and any withheld tax from the 1099-R included on line 58. (This assumes no nondeductible contributions.)

If there were nondeductible contributions, the taxable portion of the distribution will be computed on Form 8606, Part I, that amount will appear on line 15b with the gross amount on line 15a, and 10% of the taxable amount on line 54.

TMF ExRO
Phil Marti
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