TAXMAN Posted May 12, 2014 Report Share Posted May 12, 2014 Do I understand this? TP put $ in roth at age 65. In fact tp made contribution on 09-18-2009. TP took distribution 12-09-2013. I believe tp owes tax on earnings but no penalty. Do you agree? Quote Link to comment Share on other sites More sharing options...
jklcpa Posted May 12, 2014 Report Share Posted May 12, 2014 Yes, there will be no penalty because the 5-year rule is moot since he is over 59 1/2, but the 5-year rule applies in all cases before earnings can be tapped tax-free. Quote Link to comment Share on other sites More sharing options...
JohnH Posted May 12, 2014 Report Share Posted May 12, 2014 Did he take a distribution of the entire amount? In that case he will owe tax on the earnings. But if he took a partial distribution, then the non-taxable contribution comes out tax free. There's no tax until he dips into earnings. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted May 12, 2014 Report Share Posted May 12, 2014 John is correct. I assumed that the distribution exceeded the contribution since the OP mentioned taxing the earnings. Follow the ordering rules. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted May 12, 2014 Report Share Posted May 12, 2014 Yes. If you take a distribution from your designated Roth account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. And there is no penalty because there was no deduction when the contribution was made. Quote Link to comment Share on other sites More sharing options...
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