Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next
Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121258  
Subject: Re: Roth IRA early distribution penalty Date: 2/4/2013 4:57 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
RBMunkin,

You wrote, The return was DONE except for that one item. Very simple return. Just a W2 and this 1099-R. The refund grew a lot just by clicking the Box 7 "early distribution" option. With that choose there is NO penalty or tax on the Roth IRA early distribution. I can't figure out why. I Googled and don't see any exception for his simple case. And even if there were, there was no exception information included in the return in Turbo Tax.

I'm not a tax expert, but what was in Box 2A? From what I can tell, this is the important part of a 1099-R. What's more, the IRA administrator can put an X in Box 2B to indicate that the taxable portion is unknown. This gives the administrator the option to not maintain a taxable cost basis and leave it up to your friend to figure out.

Finally, the 10% penalty only applies to taxable earnings on his contributions that were withdrawn. If he didn't earn much, the penalty might not be much either - even though he may have withdrawn everything. Also, your friend and/or the administrator are probably counting the earnings as the last thing withdrawn, which means he may have just withdrawn principal from his original contributions.

- Joel
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Value Hounds

My Big Fat Greek Splat
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement