Question

How do I take a Roth IRA distribution of principle amounts (contributions and conversions)?

Forum|Forum|3 years ago
May 31, 2023
2 replies
0 views

I do not want to touch the earnings and plan to leave inside the Roth IRA. 2 years remain of two of the conversion contributions. Since I have already paid tax on these principle amounts ; may I withdraw without penaltys and fees?

TurboTax Online

D

dmertz

Employee

The ordering rules for Roth IRA distributions are automatic. Form your own records, you yourself must establish the amount of your Roth IRA contributions, which come out first, and the amount of your conversions which come out next. Amounts distributed before age 59½ from your basis in taxable conversions that have not completed the 5-year conversion holding period are subject to a 10% additional tax unless you have an exception to that penalty.

Ordering rules: https://www.irs.gov/publications/p590b#en_US_2022_publink100089915

N

NCPERSON1

@alenkeln - how old are you? that simplifes matters if you are over 59,5 as there is no 10% penalty, which is the same as a TRAD IRA. Conversions can always be distributed without additional tax (because you already paid the tax when contributed); but 10% penalties may apply, based on the chart below.

here are the rules:

as noted, the IRS presumes that all Contributions are distributed first, all Conversions next and Earnings Last.

Under 59.5 years old

Over 59.5 years old

Roth opened less than 5 calendar years

Contribution: no penalty and no tax liability

Conversions: 10% penalty and no tax liability

Earnings: 10% penalty and tax liability (exceptions apply)

Contribution: no tax liability

Conversion: no tax liability

Earnings: tax liability (exceptions apply)

Roth opened at least 5 calendar years

Contribution: no penalty and no tax liability

Conversions: no penalty on contributions made at least 5 years ago; 10% penalty for contributions made in the last 5 years; no tax liability

Earnings: 10% penalty and tax liability (exceptions apply)

Contribution: no tax liability

Conversion: no tax liability

Earnings: no tax liability

D

dmertz

Employee

@NCPERSON1 , that chart is a bit incomplete because it does not address the difference between distributions involving basis in taxable Roth conversions and distributions involving basis in nontaxable Roth conversions. (Distributions of basis in nontaxable Roth conversions are never subject to the 10% early-distribution penalty.) Many people make nontaxable Roth conversions with the backdoor method. IRS Pub 590-B provides the complete information.