<prompt> Human: I was under the impression that withdrawals from the principal of an IRA were not taxable, only a withdrawal from interest earnings would be, and would also be subject to a 10 tax. However, when I look at the instructions for Form 8606 referred to by the IRS letter, I dont see any verbiage that really supports this. Am I misinformed?It doesnt make any sense to me why I would have to pay additional tax on money that Ive already paid income tax on, prior to putting it in the IRA...  <response>: Because you didnt properly fill out the form, they assume the withdrawal was of earnings and assign the penalty. You have to submit the proper forms to show it was only principal. 