In Feb. of 2007 we put $3500 into a traditional IRA. We later had an emergency come up, and took an early distribution of almost the whole thing. Our statement shows that we have $102 in there now. On our taxes I have entered the info from the 1099-R, but under the deduction area, it asks if I contributed money to an IRA. We did of course; $3500. It tells me to find the amount that we contributed on the statement from our financial institution. That statement says $102. Is this what I put in for contributions??? Any help would be much appreciated!!

My guess, and it is a guess, is that the IRS is concerned with what you put in for the entire year, and that putting $X in and later the same year taking $Y out means that your contribution for that year is $X - $Y.

I assume you did not deduct the $3500 from your taxable income on last year's taxes? Even though you opened the account in February of 2007, it is normal to apply the tax deduction for an IRA to the previous tax year until April 15th tax filing day. So my concern is that you may have deducted your IRA contribution from last year's taxes. In that case you may be subject to a 10% tax penalty for the early withdrawal. For example, if I were to open an IRA today with some cash on hand and I was in a position to make a pre-tax contribution, then I would make the contribution applicable to my 2007 taxes even though it is January 2008. You can do that until April 15th.

If you didn't deduct it from last year then you shouldn't have any problem because the bank is only reporting the amount on the form you received and that is the amount you must also report.

Finally, if the $3500 was earned in 2007, you may not deduct it from your gross taxable income.