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Roth ira early withdrawals

Forum|Forum|7 years ago
June 1, 2019
28 replies
151 views

I've had my Roth Ira for over 5 years now. I am under 59 1/2 and put in $6500 3 years ago. I took out $1400 early withdrawal for personal reasons and am now being taxed 10%. Is this right??? I thought the rule was if the account was open for more than 5 years I would be allowed to withdraw my contributions without penalty? What am I missing here, am I wrong?

TurboTax Premier Online

Best answer by DS30

It depends

For Roth IRAs, you can always withdraw post-tax contributions (also known as "basis") from your Roth IRA without penalty.

When you get to the screen that titled "Enter Prior Year Roth IRA contributions", make sure you are entering the total amount of all your previous Roth contributions. (see screenshot) So if you contributed $20,000 to your Roth IRA in prior years, you will put $20,000 in the amount box on this screen.

You can always withdraw contributions (but not earnings) that you made to your Roth IRA tax and penalty free at anytime. Additionally, the Ordering rules for withdrawals from a Roth IRA are: first from regular contributions, then from Conversion and rollover contributions, on a first-in, first-out basis and finally from Earnings on contributions.

Please note: A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

Over age 59½
Death or disability
Qualified first-time home purchase

A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax penalty contributions (also known as "basis") from your Roth IRA without penalty.

When you are entering this information into TurboTax, your Form 1099-R, box 7 codes J, Q and T identifies a Roth IRA distribution and determines the tax treatment. If you have a J or a Q, the distribution is considered taxable unless there is an exception. TurboTax will guide you on all the exceptions.

Please refer to this IRS link for more information about Roth IRAs:

https://www.irs.gov/publications/p590b/ch02.html#en_US_2015_publink1000231071

To enter your 1099- R in TurboTax Online or Desktop (you may need to upgrade to report these distributions), please follow these steps:

Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
Next click on “Wages and Income” ("Personal Income" in TurboTax Home & Business)
Next click on "jump to full list" or “I’ll choose what I work on”
Scroll down the screen until to come to the section “Retirement Plans and Social Security”
Choose "show more", then IRA, 401(k),Pension Plans (1099-R) and follow the onscreen instructions

Please note that all distributions will be reported on your tax return (whether or not they are taxable) on Form 1040 on line 15(a) (or 16(a) but only the taxable portion will show on your return as taxable on line 15(b) (or 16(b)).

To preview 1040:

Sign into https://myturbotax.intuit.com/
Under Tax Timeline, click on Continue your return
Go to "My Account" > "Tools"
Under the Tools Center, select "view tax summary"
Select "Preview my 1040"

D

DS30Answer

Level 12

It depends

For Roth IRAs, you can always withdraw post-tax contributions (also known as "basis") from your Roth IRA without penalty.

When you get to the screen that titled "Enter Prior Year Roth IRA contributions", make sure you are entering the total amount of all your previous Roth contributions. (see screenshot) So if you contributed $20,000 to your Roth IRA in prior years, you will put $20,000 in the amount box on this screen.

You can always withdraw contributions (but not earnings) that you made to your Roth IRA tax and penalty free at anytime. Additionally, the Ordering rules for withdrawals from a Roth IRA are: first from regular contributions, then from Conversion and rollover contributions, on a first-in, first-out basis and finally from Earnings on contributions.

Please note: A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

Over age 59½
Death or disability
Qualified first-time home purchase

A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax penalty contributions (also known as "basis") from your Roth IRA without penalty.

When you are entering this information into TurboTax, your Form 1099-R, box 7 codes J, Q and T identifies a Roth IRA distribution and determines the tax treatment. If you have a J or a Q, the distribution is considered taxable unless there is an exception. TurboTax will guide you on all the exceptions.

Please refer to this IRS link for more information about Roth IRAs:

https://www.irs.gov/publications/p590b/ch02.html#en_US_2015_publink1000231071

To enter your 1099- R in TurboTax Online or Desktop (you may need to upgrade to report these distributions), please follow these steps:

Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
Next click on “Wages and Income” ("Personal Income" in TurboTax Home & Business)
Next click on "jump to full list" or “I’ll choose what I work on”
Scroll down the screen until to come to the section “Retirement Plans and Social Security”
Choose "show more", then IRA, 401(k),Pension Plans (1099-R) and follow the onscreen instructions

Please note that all distributions will be reported on your tax return (whether or not they are taxable) on Form 1040 on line 15(a) (or 16(a) but only the taxable portion will show on your return as taxable on line 15(b) (or 16(b)).

To preview 1040:

Sign into https://myturbotax.intuit.com/
Under Tax Timeline, click on Continue your return
Go to "My Account" > "Tools"
Under the Tools Center, select "view tax summary"
Select "Preview my 1040"

D

dmertz

Level 15

Although most of this answer is correct, for a distribution to be a qualified distribution, the distribution must be made after 5 years after the beginning of the year for which you first made a Roth IRA contribution *AND* you must be age 59½ or older (or disabled). Since the distribution occurred before age 59½, the distribution is not a qualified distribution and the taxability is determined by whether the distribution is more or less than the amount of original contributions.

N

Norman1934

Level 2

I BORROW 25000 TO PAY DOWN PAYMENT ON NEW HOME HOW CAN I DEDUCT TE AMOUNT THIS WAS TO GET OUT OF PAYIN RENT AND HAVE KNOWING BUT RENT RECEITS AND I AM UNDER 59 1/2 AM 52

J

JamesG1

Level 15

This IRS Publication lists the Exceptions to the !0% Penalty on early distributions.

IRS Publication 590-B Page 24

First home

Even if you are under age 591/2, you don't have to pay the 10% additional tax on up to $10,000 of distributions you receive to buy, build, or rebuild a first home.

After you have entered the 1099-R, you come to the screen Let’s see if we can reduce your early withdrawal penalty, click Continue.

If you qualify for the distribution, the option will be listed at the screen These Situations May Lower Your Tax Bill.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

J

JHARV

Level 2

I have 2 questions regarding Roth IRA Distributions

1) My 1099-R shows 2 distributions (distribution code J) from my account (distribution was for the same Investment Company, but with separate amounts for 'A' shares and 'C' shares) from same payer. Is it OK to add both amounts together under one 1099-R in TurboTax?

2) I am under 59 1/2 and received the distribution in 2020 for the total of my principal contributions from 2012 through 2018 (no contributions were made in 2019 or 2020). Since I was under 59 1/2, but had been in the plan for over 5 years, I assumed there would not be any taxes/penalties since I did not get any distributions on earnings.

When you get to the screen “Enter Prior Year Roth Contribution” it asks you to Confirm net regular contributions prior to 2020 that remain in your Roth IRA. In the box on the screen it asks for “Roth IRA Contributions prior to 2020”. Should I put amount as 0.00 since I received full distribution of all prior year contributions in 2020 and which no longer remain, or is it asking for the total contribution amounts I made in years prior to 2020?