I opened a Roth IRA in 2008 with $2500. In 2011, I withdrew $2000. I did not withdraw earnings. I know that I need to fill out form 8606 and the 1099-R section on Turbo Tax, but it's so confusing. I did not receive a 1099-R from Sharebuilder, but perhaps I will?
Regardless, am I correct that because I only withdrew the contributions and not any earnings, I will not have to pay the early penalty?
Line 22 says "enter your basis in Roth IRA contributions". This, according to the instructions for form 8606, seems to be the total of distributions prior to 2011 (which was none), plus the total contributions (which was $2500). Since I took out less than $2500 (and none of it was earnings), then my taxable amount is 0. That is, if I filled out the form correctly!
I plan on having my taxes done by a CPA, but I'm just trying to see if I can understand this correctly.
, IAFF retired Firefighter/medicSuperUser
The issue of liability for the 10% penalty on early distributions varies depending on whether or not this Roth account as created through a Roll-over from a Traditional IRA or other deferred income account, or whether you opened the Roth fresh using after tax monies.
Contribute an answer
People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:
- Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
- Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
- Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
- Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
- Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.