"Acadia" <acadiaNOT[at]ONyourLIFE.com> wrote:

- quote -

Either you don't fully understand or you're confusing me
with "gains." Since this is a Roth (I read ahead) and
you are fully liquidating it the basis for the penalty is:

1. Any amount in excess of the sum of your contributions
and conversions.

2. Any conversions done after 2001 (assuming a 2005 distribution).

Your taxable income will be the excess of the distribution
over the sum of your contributions and conversions. You'll
report it in Part III of Form 8606.

- quote -

The penalty will be part of your total 2005 liability. You
can ask the custodian to withhold a specific amount or you
can make estimated tax payments.

Before you do either, I'd suggest looking at IRS Publication
505 to see whether you need to do any kind of prepayment.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I need to cash in an IRA early. I fully understand that I
will be paying a 10% penalty for any gains that have been
made thru the years. My question is: How do I pay this
penalty? Do I pay when I withdraw the funds from the
company that currently holds the IRA, or do I pay when I do
my yearly taxes every Spring. This is a Roth IRA that was
converted from a Traditional IRA several years ago; I no
longer need to make any conversion payments. Thank you all
for all replies.

Acadia

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >