Hello!

I withdrew all monies in my Roth IRA account in 2006 as a first time home owner. I'm confused about the various components of the distribution and would very much appreciate some guidance on the tax ramifications.

The IRA was opened in 2001. A total of $15,000 was contributed from 2001-2005. Additionally, I rolled monies from a former 401K plan in January 2006 into my Roth IRA in the amount of about $6,800 via a rollover IRA. My Roth IRA was valued at about $28,900 when I closed the account in May 2006.

I understand that I can take out the $15,000 tax- and penalty-free. What about the amount rolled over from the 401K and all earnings on the account, which equal about $7100?

Thanks in advance for your feedback.

The amount converted in 2006 must age for five years in your Roth IRA in order to avoid the 10% early distribution penalty. If it has not aged for five years, the penalty does not apply if you meet at least of the exceptions.

The earnings are tax and penalty free if the distribution is qualified.
If the distribution is not qualified, the following applies:

1. The earnings are subject to the 10% early distribution penalty, unless an exception applies and
2. Income tax