topic Roth Earnings Subject to 10% Tax and/or Penalties?? in Retirement tax questions

Roth Earnings Subject to 10% Tax and/or Penalties??

irunalot — Wed, 17 Dec 2025 17:40:12 GMT

Has anyone over 59-1/2 and with a Roth account older than 5 years tried to take EARNINGS from their Roth IRA and see if TurboTax calculates a tax or a penalty? Why I ask:

1) Contributions and conversion dollars are straight forward per IRS pub 590B. Earnings are not specifically mentioned; I only see the word distribution which can mean any of the three.

2) Everything I see online says if you're over 59-1/2 and your Roth 5-year clock is met, you can take earnings out tax free and penalty free. But, they don't specify which 5-year clock they're referring to, the age of the account or the timing since the conversion!

3) I use two financial advisors; One advisor says I'm home free because my first Roth account is over 5 years old and I'm over 59-1/2 years old. The other advisor is adamant - I have to keep track of every Roth conversion because they each have their own 5-year clock for earnings distributions, even though I'm over 59-1/2!

So, I figured I'd make up a phony TurboTax filing and see if TurboTax is programmed to tax me or penalize me for distributing earnings a year after a conversion. Spare me the grief if someone else has already done this!

Any thoughts are appreciated and apologies for having to answer this multiple times.

Re: Roth Earnings Subject to 10% Tax and/or Penalties??

fanfare — Wed, 17 Dec 2025 17:51:06 GMT

There's a difference between earnings, and allocable earnings on an excess contribution being removed.

the latter are not penalized if you are under 59 1/2.

@irunalot

Re: Roth Earnings Subject to 10% Tax and/or Penalties??

Opus 17 — Wed, 17 Dec 2025 19:50:09 GMT

Are you saying Turbotax has a calculation error?

According to the law, your first advisor is correct.

Briefly, the 10% penalty for early withdrawal never applies over age 59-1/2.

The general 5 year clock means that earnings are subject to income tax if you withdraw them in less than 5 years, no matter your age. And they are subject to an additional 10% if under 59-1/2.

The 5-year clock on each conversion means there is a 10% penalty if it is less than 5 years and you are under age 59-1/2. This is because withdrawals from regular IRAs are subject to the same penalty. The IRS doesn't want to someone under 59-1/2 to be allowed to do a Roth conversion and pay the income tax, then withdraw and skip the penalty. But the 10% penalty never applies if you are over age 59-1/2, which means you can ignore the 5 year clock on individual conversions.

Re: Roth Earnings Subject to 10% Tax and/or Penalties??

irunalot — Wed, 17 Dec 2025 22:05:24 GMT

Wow! That makes the most sense and it's what I've been debating with my second advisor. Why penalize a Roth conversion when I can just take it out of a traditional IRA without penalty!!??

No, absolutely not saying TurboTax has a calculation error. I merely wanted to use TT as a tiebreaker. I figured TT would be 100% correct.

Thanks for the quick answer. Much appreciated!

Re: Roth Earnings Subject to 10% Tax and/or Penalties??

dmertz — Thu, 18 Dec 2025 03:44:08 GMT

For a Roth IRA distribution made after age 59½, the IRA custodian will report the distribution on Form 1099-R with code T or code Q in box 7 to indicate that no part of the distribution is subject to an early-distribution penalty.

For distributions made before age 59½, the IRA custodian will used code J to indicate that the taxable part of the distribution is subject to a 10% early-distribution penalty (where the taxable portion of the nonqualified distribution will be calculated on Form 8606 Part III of the tax return.)

Re: Roth Earnings Subject to 10% Tax and/or Penalties??

irunalot — Wed, 17 Dec 2025 23:16:56 GMT

Got it. Many thanks!!