<prompt> Human: So, this year we bought our first house. Unfortunately, there was more than a few nasty surprises after we moved in and we spent more than we really planned to but it wasnt a terrible amount of money, we could manage it, but only by staying on a strict budget. One of the things we did to fund the down payment was to cash out a Roth IRA a previous employer had set up for me. There was 25k in the account. I knew there was penalties for cashing out the account but it should be 10 minus the first 10k which we could use to purchase our first home. So, 1,500. Working on my taxes, using HR Blocks software, no matter how I play with it, adding the 1099-R to the taxes, it automatically calculates we owe over 10k in taxes. So, is what I was told by Schwab completely off? Should the penalty have not be 1,500? Im still researching the answer but Im trying to move fast and this isnt a clear topic. Could it be that the disbursement pushed us in to the next tax bracket? It did bring the income from 130k a year to 150k. Either way, like I said, were living on a really tight budget and the 10k hit is simply not swing-able at the moment. So, first question, whats up with the taxes owed. Second, what do I do next besides breathing in to a brown paper bag? Assistant: It sounds like it was pre-tax money. Are you sure it wasnt a SIMPLE IRA or similar? It was definitely a Roth? Ive never heard of employers contributing to someones Roth.I guess Im wondering who paid taxes on the money before it went into the Roth? Human: On the 1099-R there is a check on the IRASEPSIMPLE so Im guessing its a SIMPLE IRA?  <response>: yeah, so its tax deferred money. The 25k distribution is going to be taxed at your marginal tax rate, so 28 federal ie: 7k. Add in the 10 penalty on part of it and that brings you to 8.5k. I dont think theres any FICA but there should be state taxes, I dont know if HR Block is including state tax? In California, for instance, itd be about another 2k. So 10.5k.Obviously Im just some guy on the internet. You should find out what type of account you liquidated and double check the taxes are correct. 