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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121451  
Subject: Re: No tax on returned Roth Contributions? Date: 3/5/2003 5:42 PM
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12/00: Rolled-over $6517.96 (and reported it as income)
7/01: Contributed $2389.83 (and did not deduct it)
2/02: Withdrew $8500.00 (and paid no tax at the time)

So since I'm essentially having part of my (already taxed) contributions
returned to me, I don't have to pay tax (or penalty) on the $8,500
withdrwawal, right?


Not quite. Premature Roth distributions are ordered as follows:

1. Contributions
2. Conversions
3. Earnings

Thus, your $8500 withdrawal (line 19 of the 8606) consists of:

1. $2389.83 in contributions (line 20 of the 8606) plus
2. $6110.17 in 2000 conversion (line 22 of the 8606)

Since all this money has been previously taxed, you owe no income tax on the distribution (line 23 of the 8606). Since the conversion lasted less than 5 years you do, however, owe the 10% premature distribution penalty on the $6110.17, unless you meet an exception. See the note at line 21 of the 8606 and page 8 of the 8606 instructions.

Phil Marti
VITA Volunteer
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