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Roth IRA withdrawls of contributions
eperez
04-10-2008, 8:59 PM | Post #2507233
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I have read many many places that one can withdraw Roth IRA contributions without paying income tax.
then, as I researched the IRS.gov website and publications for more info, I read in an IRS publication or FAQ [cant remember where, should have printed it out] that while the contributions are tax-free, you need to declare as income any earnings those contributions earned since the contributions were originally made. (easy for them so say - how would i figure that??) This rule might just apply to excess contributions or early withdrawls, not sure.
Then I read in the IRS Form 1099-R instructions...
>>===============
Roth IRA. For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a [taxable portion] blank except in the case of an IRA revocation or account closure (see page 2) and a recharacterization (see page 4). Use Code J, Q, or T as appropriate in box 7.
** Code J = Early distribution from a Roth IRA. Use Code J for a distribution from a Roth IRA when Code Q or Code T does not apply. But use Code 2 for an IRS levy and Code 5 for a prohibited transaction.
** Code Q = Qualified distribution from a Roth IRA. Use Code Q for a distribution from a Roth IRA if you know that the participant meets the 5-year holding period and:
* The participant has reached age 591/2,
* The participant died, or
* The participant is disabled.
Note: If any other code, such as 8 or P, applies, use Code J.
** Code T = Roth IRA distribution, exception applies. Use Code T for a distribution from a Roth IRA if you do not know if the 5-year holding period has been met but:
* The participant has reached age 591/2,
* The participant died, or
* The participant is disabled.
Note: If any other code, such as 8 or P, applies, use Code J.
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Code 8 and P both relate to Excess contributions distributions.
When I talked to a rep at Vanguard, where I have my Roth IRA, they said Vanguard would classify a distribution of contributions as a Code J, since this would be a distribution of contributions and not an early withdrawl.
Who knows what the buzz is on withdrawl of contributions but not the earnings?? Any other sources I can ask?? My CPA wasnt clear on it, either.
thx in advance,
edward perez
Topics
Distributions
income tax
IRA
IRAs
Roth
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