I made an early withdrawal from my Roth IRA. I knew about the 10% penalty but am confused as to why it added it to my income. Roth is post tax so why am I paying twice?

 

Retirement tax questions

Have you had the Roth for 5 years?

Did you withdraw more then what you contributed - meaning did you only take out as much as your contributions or did you also withdraw the earnings (if any).
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

Retirement tax questions

I withdrew it all and I did have it for more than 5 years. I was just shocked that it added the amount I withdrew (not much was earnings btw) to my income. My taxes I owed went through the roof!

Retirement tax questions

Did you answer ALL of the followup questions, including the question that asks how much you originally contributed?

Retirement tax questions

You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the followup questions will ask for your prior year contributions not previously withdrawn.   Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Kadian
New Member

Retirement tax questions

You generally can make a tax-free withdrawal of contributions if you do it before the due date for filing your tax return for the year in which you made them. 

So, yes, you are correct that withdrawing contributions from your IRA is not taxable, because your contributions are always made with after-tax dollars. However, withdrawing your earnings is different. 

Earnings, in this sense, is any money you withdrew that exceeded the amount you originally contributed. In addition to the 10% penalty, you may also be subjected to pay income taxes on the withdrawal of the earnings. 

For additional information  go to www.irs.gov/pub590b.