Withdrawl of Roth IRA original contributions

[Guest saber]

From my understanding the money you originally put into a Roth IRA can be withdrawn at anytime without a penalty. It is just the gains when withdrawn are taxed and penalized if they are non-qulified withdrawls.

What can I cite to an IRS Auditor to prove my point with the above?

I've shown her my total contributions to the Roth account based on brokerage statements which show I have more than enough contirbutions to cover the withdrawls I made.

I even pointed to parts of IRS Pub 590 (which she told me about) which state in not so many words what I am trying to get across.

Any suggestions would be greatly appreciated.

[mbozek]

Just what part of Pub 590 doesnt the auditor understand?

[Appleby]

Refer the auditor to

-Page 61-62 of 590.

-The instructions for filing Form 8606.

-IRC 408A(d)(4)(B)

-Treas Reg § 1.408A-6, Q&A-4

[BPickerCPA]

Was the original money going into the Roth from annual contributions, or from a CONVERSION?

If from a conversion, the auditor may well be correct.

[Guest saber]

Was the original money going into the Roth from annual contributions, or from a CONVERSION?

If from a conversion, the auditor may well be correct.

No conversions in this Roth.

[John G]

You may want to ask to speak to a IRS supervisor. It sounds like your auditor did not understand the rules or was misapplying the rules from some other situation (to be charitable you might say misheard or misspoke). It will not hurt to say that you received the advice from a few accountants who are knowledgeable on IRA issues!

Keep a record of your interaction with the IRS. Be polite, but insist that they send you a letter acknowledging that you handled your taxes correctly.

[Guest saber]

Going back to this issue, I still seem to have a hard time convincing the auditor that the amounts withdrawn should not be penalized. This is even after showing her treas reg cites showing that the original contributions are not subject to penalty when withdrawn. She said that even after talking with some people at her office they still are of the feeling that my amounts withdrawn should be penalized. Though she did make a point to say they were not being taxed, just penalized.

I told her I would send her some more public based info (like news clippings and what not) to show that original contributions are not penalized when withdrawn.

Anyone have any more good cites of public sources to show this auditor that you don't penalize withdrawals of original contributions?

I've pulled a few off of a google search, anything else would be appreciated. Are there any congressional web sites that talk about this?

If this auditor does not understand and still insists on charging the penalty I have asked for an appeal request. Though I would like to resolve it before it gets that far.

Thanks

[Guest Derelict]

From 1.408A-6

Q-4. How is a distribution from a Roth IRA taxed if it is not a qualified distribution?

A-4. A distribution that is not a qualified distribution, and is neither contributed to another Roth IRA in a qualified rollover contribution nor constitutes a corrective distribution, is includible in the owner's gross income to the extent that the amount of the distribution, when added to the amount of all previous distributions from the owner's Roth IRAs (whether or not they were qualified distributions), exceeds the owner's contributions to all his or her Roth IRAs. For purposes of this A-4, any amount distributed as a corrective distribution is treated as if it was never contributed.

Q-5. Will the additional tax under 72(t) apply to the amount of a distribution that is not a qualified distribution?

A-5. (a) The 10-percent additional tax under section 72(t) will apply (unless the distribution is excepted under section 72(t)) to any distribution from a Roth IRA includible in gross income.

I'm not sure what the auditor does not get ...

[Guest saber]

From 1.408A-6

Q-4. How is a distribution from a Roth IRA taxed if it is not a qualified distribution?

A-4. A distribution that is not a qualified distribution, and is neither contributed to another Roth IRA in a qualified rollover contribution nor constitutes a corrective distribution, is includible in the owner's gross income to the extent that the amount of the distribution, when added to the amount of all previous distributions from the owner's Roth IRAs (whether or not they were qualified distributions), exceeds the owner's contributions to all his or her Roth IRAs. For purposes of this A-4, any amount distributed as a corrective distribution is treated as if it was never contributed.

Q-5. Will the additional tax under 72(t) apply to the amount of a distribution that is not a qualified distribution?

A-5. (a) The 10-percent additional tax under section 72(t) will apply (unless the distribution is excepted under section 72(t)) to any distribution from a Roth IRA includible in gross income.

I'm not sure what the auditor does not get ...

I pretty much gave her those regs and cited that to her in my letter.

If she does not understand it, I guess I will have to push it to the appeals level.