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How to take a distribution from a ROTH before 59.5

Forum|Forum|5 years ago
December 25, 2020
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I want to take a distribution from my ROTH IRAs that is less than the conversion amounts I did that were all 5 years and older plus my initial contribution 20 years ago. I am not 59.5. I believe I can do that without tax or penalties but how do I prove that the distribution is less than the conversions and contribution? I think I need to know when each contribution and conversion was made. Do I need to know it? Is there a way to get that info, if you don't have your tax paperwork or forms from way back 20 years ago?

Best answer by dmertz

As with any nonqualified distribution from a Roth IRA, TurboTax prepares Form 8606 Part III to calculate the taxable amount. When you click the Continue button on the Form 1099-R Entries page, TurboTax will ask for your basis in Roth IRA contributions and conversions to complete the entries on Part III needed to calculate the taxable amount (which will be zero in your case); yes, you must provide this information. TurboTax will also use the information to determine that there is no penalty to be reported on Form 5329.

The Roth IRA custodian(s) have sent Forms 5498 (as well as Forms 1099-R reporting distributions that would have previously reduced your basis to some extent) to you and to the IRS to document the contributions and conversions, so the IRS already has the information needed to substantiate the entries on Form 8606 Part III. If you don't still have these documents yourself, it might be difficult to get copies from either the IRS or from the IRS custodian going back 20 years. Approximating the values might be your only option.

Be aware that distributions from your Roth IRA that are not rolled over eliminate the possibility of future tax-free growths on that amount, so a Roth IRA distribution should generally be a funds source of last resort.

D

dmertzAnswer

Employee

As with any nonqualified distribution from a Roth IRA, TurboTax prepares Form 8606 Part III to calculate the taxable amount. When you click the Continue button on the Form 1099-R Entries page, TurboTax will ask for your basis in Roth IRA contributions and conversions to complete the entries on Part III needed to calculate the taxable amount (which will be zero in your case); yes, you must provide this information. TurboTax will also use the information to determine that there is no penalty to be reported on Form 5329.

The Roth IRA custodian(s) have sent Forms 5498 (as well as Forms 1099-R reporting distributions that would have previously reduced your basis to some extent) to you and to the IRS to document the contributions and conversions, so the IRS already has the information needed to substantiate the entries on Form 8606 Part III. If you don't still have these documents yourself, it might be difficult to get copies from either the IRS or from the IRS custodian going back 20 years. Approximating the values might be your only option.

Be aware that distributions from your Roth IRA that are not rolled over eliminate the possibility of future tax-free growths on that amount, so a Roth IRA distribution should generally be a funds source of last resort.

D

david9821Author

So I need to find my forms 5498? Maybe a problem but I might find them.

I have had no distributions yet and the amount I am considering to withdraw will be far less than the total of conversions that have aged 5 years or more. I can probably just submit that info. For me I will be 59.5 by the end of 2021 so it is only a problem (small problem for 1 year).

After I turn 59.5 I have no tracking issues to deal with, I think.

ROTHs are the best for long term investment I know. Except maybe highly appreciated stock if you will be dying soon and someone will get the stepped-up basis.

macuser_22

Employee

It can only be an "early" distribution if before age 59 1/2, after that it is no longer early so no penalty can apply. Your prior contributions are irrelevant.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**