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Roth IRA tax questions
Posted on 4/7/12 at 12:50 pm
Posted on 4/7/12 at 12:50 pm
I made a $4,000 contribution to my Roth IRA in both 2007 and 2008. In 2011, I took a distribution of $4,100. I am well under 59.5 years of age.
Does an early distribution penalty apply to me? It is only contribution that was withdrawn - no gains.
Does an early distribution penalty apply to me? It is only contribution that was withdrawn - no gains.
4
Posted on 4/7/12 at 3:02 pm to bbates4
I don't think any penalties would apply when you withdraw your contributions. The extra $100 may be penalized though.
This post was edited on 4/7/12 at 3:04 pm
Posted on 4/7/12 at 3:06 pm to bbates4
Ok. I read your post again. If you contributed a total of $8k then no penalty at all.
Posted on 4/7/12 at 6:14 pm to bbates4
quote:No, you can always withdraw what you have invested, no penalty from a Roth IRA. I did this when I got divorced in 2004, there was no tax issue.
Does an early distribution penalty apply to me?
Posted on 4/25/12 at 10:35 am to Lou
Another question about this...I did not declare the income from this Roth withdrawal (mentioned in OP) in my return. Thinking about it now, I myself know that it's not taxable income, but the IRS does not. If I were to get audited, would there be a penalty for not declaring the income even though there are no taxes due on it? Sorry if this question doesn't make sense. I think I'll get a CPA next year......
Posted on 4/25/12 at 10:49 am to bbates4
I have no idea but I don't know why you would have to tell the IRS about "income" that was already income in a previous year and taxed as such.
Posted on 4/25/12 at 11:06 am to Teddy Ruxpin
Yea I don't know either. Its just that whatever document was furnished to IRS by Vanguard didn't show my basis or anything, just the withdrawal. It didn't specify that it was not gains.
Posted on 4/25/12 at 11:37 pm to bbates4
The ordering rules for distributions from Roth accounts is pretty specific. The first money out is money contributed to the Roth account on an after tax basis. Since your total after tax contributions exceed the amount distributed you should owe zero in taxes or penalties for early withdrawal. That being said, you should have reported the $4,100 of distributions reported to you on Form 8606 and shown that the distribution was a return of after tax contributions. Don't be surprised of you hear from the IRS that you did not report on your tax return the money that was reported to you on Form 1099-R.
Posted on 4/26/12 at 12:09 am to Poodlebrain
quote:
The ordering rules for distributions from Roth accounts is pretty specific. The first money out is money contributed to the Roth account on an after tax basis. Since your total after tax contributions exceed the amount distributed you should owe zero in taxes or penalties for early withdrawal. That being said, you should have reported the $4,100 of distributions reported to you on Form 8606 and shown that the distribution was a return of after tax contributions. Don't be surprised of you hear from the IRS that you did not report on your tax return the money that was reported to you on Form 1099-R.
I hate the tax code. Sounds like you are planning for a mission to Mars.
This post was edited on 4/26/12 at 12:10 am
Posted on 4/26/12 at 10:49 am to Teddy Ruxpin
Your 1099-R should be coded that the distributions were from ROTH contributions, and not taxable, but if it is not reported on the return you will get a bill from the IRS for tax on the 4,100, 10% early withdrawl fee, and penalties and interest for not reporting it. I would amend your return before you get any corespondence from them
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