I had to close my Roth IRA in 2017 that I opened in 2015 to pay my property taxes due to low income. How can I file so I am not penalized?

[AnnetteB · Accepted solution]

Even though you only opened the Roth IRA in 2015, you will only pay taxes and the 10% early distribution penalty on any earnings that were included with your distribution.  If your distribution consisted only of your contributions, there will be no tax consequence.

You will receive a Form 1099-R reporting your distribution.  As you enter the 1099-R into your tax return there will be follow-up questions that you will answer to determine how much of the distribution will be taxable, if any.  One of the questions will ask about the contributions that were made to the Roth account – this is the basis of the account.  If the basis is greater than your distribution, then none of the distribution will be taxable.

If there is a taxable portion, you will be given a list of possible exceptions to the 10% early distribution penalty.  Take a look to be sure that you do not qualify for any of those.  Paying property tax is not a valid exception.