Taxes and Early IRA Distribution

[campinkook]

I'm afraid I may already know the answer to this, but:
I've been unemployed for 13 months now. I took early distribution of a small IRA and my HSA to meet obligations. 7 months later, I filed for and subsequently received a discharge in a no asset Chapter 7 claim. I'm still on the hook for the 10% penalty, right? If so, looks like they will get to squeeze blood from a stone I guess I thought there might be some relief for those mired in this deep recession! One more step on this ladder out of the muck!
Thanks all,
JP

[BobMango]

Yes you are on the hook for the 10%, however if you have kids you might be able to offset that with the Child Tax Credit. Additionally, depending on the size of your household and income, you might qualify for the Earned Income Credit. Your IRA and unemployment will not count against your Earned Income so it's worth taking a look. I'd recommend having a tax professional take a look.