topic Early withdrawal from Roth IRA after Roth 401(k) rollover in Retirement tax questions

Early withdrawal from Roth IRA after Roth 401(k) rollover

sstng — Mon, 16 Mar 2020 11:54:14 GMT

Situation:

$29,449 basis from previous Roth 401(k) rolled over to new Roth IRA in 2018

Subsequent $25,000 early (non qualified) distribution from Roth IRA in 2019

1099-R :

- Box 1 (Gross distribution) = $25,000

- Box 2a (Taxable amt) = $0

- Box 2b (Taxable amt not determined) = Checked

- Box 7 code = J (early distribution from Roth IRA)

Am I right in assuming that - having not satisfied the five-year rule - even though we've taken less than the previous total basis, there is still a 10% penalty we owe? And just the 10% penalty and not also ordinary income tax?

I'm having trouble determining whether I'm getting (or how to get) the right data entered into TurboTax. I've answered the following questions:

"Owned any Roth IRA for Five Years?"

-No

"Were any Roth IRAs open?" (on 12/31/2019)

-Yes

"Withdraw from Roth IRA before 2019?"

-No

Then, the following question...

"Enter prior year Roth IRA contributions"

Is this where I enter the former Roth 401(k) basis ($29,449)? If I do, the result is there are no taxes assessed.

If I enter 0, it looks like full taxes (at least ordinary income tax, possibly also 10% penalty?) are calculated on the full $25,000 distribution.

I've spent way too much time searching for answers! So I'm finally adding my own question to the forum. Thanks in advance!

Re: Early withdrawal from Roth IRA after Roth 401(k) rollover

DianeC958 — Mon, 16 Mar 2020 12:29:55 GMT

No, there is not a 10% penalty since you are just withdrawing contributions you made to the account.

You have answered the questions correctly for your circumstances to indicate that you have not owned the Roth for 5 years, you did not have a withdrawal before 2019.

Yes, when you get to the question about "Enter year prior Roth Contributions" you enter the amount of $29,449.

You can always withdraw contributions 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.

A qualified distribution from a Roth IRA is tax-free and penalty-free, the contributions and the earnings, provided that you have had the Roth IRA account for 5 years and meet the following requirements

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

Re: Early withdrawal from Roth IRA after Roth 401(k) rollover

sstng — Tue, 17 Mar 2020 00:23:58 GMT

Thank you so much, DianeC!!!