Working on an extension return (estimated tax already paid).
For 2024 my son-in-law was strapped for cash, got some bad advice and took the small amount of money he had in a Roth out, not understanding he was under 59 1/2 and not only would it become taxable income but be subject to a 10% penalty. This was not a return of excess contributions but a full distribution 1099-R code J.
Not much to do about it, he owes the tax on the mid $3K value of the distribution.
I realized I hadn't entered in the values reported on form 5498 for contributions that were made in 2024 tax year. I did so and it's $241 less tax owed. If I take the amount contributed (to the Roth) for 2024. multiply it by 10% for the amount of penalty that would have been accessed and by 12% for their marginal tax rate I come out at $238, real close to the $241 less tax calculated by TurboTax.
So just to be sure I understand the refund / tax calculations, it looks like if, a non excess removal of contributions that were made in the same tax that a full distribution is taken, the portion of the removal that is attributed to contributions made for the same tax year are not subject to tax or penalty regardless of being under 59 1/2 ?
