Client lost his job and needed to distribute from his regular IRA for living expenses. They are less than 59 1/2. Withdrew $39000 from IRA in 2011. Combined with income prior to job loss AGI is 50,000. Married filing joint. My review says that retirement distributions don’t count as earned income, but it seems the distribution’s affect on AGI eliminates the EIC and lowers the child tax credits. This seems like a triple penalty. Client owes the tax, the penalty and loses the credit that could offset the penalty. Is this correct or is there any way around this? Thanks