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Stephanie B.
Stephanie B., Enrolled Agent
Category: Tax
Satisfied Customers: 555
Experience:  MTax, EA, QuickBooks Proadvisor. Over 10 years accounting and tax experience specializing in individual and small business.
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I received a Roth IRA distribution in 2011. I am being taxed

Resolved Question:

I received a Roth IRA distribution in 2011. I am being taxed on 19000.00 of the 21000.00 total distribution. The majority of this money has already been taxed before it was placed in the Roth IRA. The payer says they cannot figure the tax. I have had the IRA for 7-8 years and was averaging 1-3 % interest per year while contributing close to the maximum amount allowed per year. I thought I was only taxed on earnings. The distribution was a non-qualified distribution. I am not 59.5 years old. I had a financial emergency and needed the money. What are my options? Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  Stephanie B. replied 2 years ago.

Stephanie B. :

Thank you for using Just Answer.


 


The taxable portion of your Roth IRA distribution will only be the earnings. The contributions you have put into the Roth are not taxable income based on what you have already said. When completing your income tax return, you will need to complete Form 8606 to show the distribution from your Roth and the contributions from prior years that make up your basis in the Roth. This gross distribution from the 1099-R will go on line 15a of the 1040 and 15b will be where you enter the taxable portion of the IRA. Most of the 1099-Rs that I see for Roth distributions do not have an amount in box 2 because the issuer does not know how much is taxable.


 


If this answers your question, please click the accept button as this is the only way we get paid for the assistance we provide to you.

If you need more clarification, please let me know. If I am not available at the time, I will be.

I appreciate the opportunity to assist you and I look forward to your response.

Stephanie

Customer:

When you say past contributions do you mean use the tax forms(5498) sent to me each year from the payer showing my contributions since the inception (when I began contributing toward my roth ira. Then subtract that amount from the distribution and place the remainder amount in line 15B. Then that is the taxable amount. Am I correct?

Stephanie B. :

Yes. The 5498 in box 10 shows the Roth IRA contributions for the tax year. Your thinking is correct. You deduct your contributions from the total distribution and this is the amount of earnings you put on line 15b. Keep in mind this taxable amount will also be subject to the 10% penalty unless there is an exception. Complete Form 5329 to figure the 10% penalty and report any exceptions.

Stephanie B., Enrolled Agent
Category: Tax
Satisfied Customers: 555
Experience: MTax, EA, QuickBooks Proadvisor. Over 10 years accounting and tax experience specializing in individual and small business.
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