Premature Distribution from a Roth IRA

[Guest Owen]

I have a Roth IRA that I've contributed 6k to, well over 5 years ago. It's worth almost 8k now. (Bad investment decisions in the late 90's) The thing is I have no record of making those contributions, and I've transferred this account between many online brokers since then, so they don't have paperwork either. I've had a recent financial reversal and need to take a distribution.

I've read that the contributions aren't taxable because they came from after tax dollars:

1) Is that true?

2) Do they get hit with the 10% penalty?

3) Even if used for law school expenses?

4) Without any paperwork, how do I prove to the IRS that I've just taken out the 6k in contributions?

Thanks in Advance!

[John G]

How indeed! You should have kept a file folder or 3-ring binder of your brokerage or mutual fund statements. Custodians normally show "contributions" for both the current and prior years. A second source of proof would be your cancelled checks (your bank may keep some records on file, so check with them). A third source, if you have used an accountant for tax filings, is that most accountants keep track of Roth contributions.

I am assuming that you have a clear memory of your initial contributions to your Roth... such as 2k, 2k and 2k in the first few years. Your worse case scenario is that you just rely upon your memory of the amount that were original contributions.

The original contributions to a Roth are not taxed at withdrawal. There is also no 10% penalty on withdrawing contributions. You need to check with IRS Publication 590 to determine if you can withdraw additional funds for qualified education expenses.

Also note Applby's comments on this thread:

http://benefitslink.com/boards/index.php?showtopic=36268

Suggestion: you need to pay more attention to your financial decisions and keep better records!

Good luck with your legal degree.

[Guest Owen]

Thank you so much for your advice...I hadn't thought of cancelled checks...Though I doubt my bank has them as far back as 96, 97, and 98, it is worth investigating.

[Bird]

Have you asked your current financial institution if they have a record of your total contributions? I think that information has to pass along with the money when you transfer from one place to another.

[JanetM]

Owen, you will need checks from 1998 forward. That is when Roths were first allowed.

[Appleby]

Have you asked your current financial institution if they have a record of your total contributions? I think that information has to pass along with the money when you transfer from one place to another.

Good question.

Passing the contribution information from one financial institution to another is not really a requirement for IRAs…but, each financial institution is required to retain documentation and records for a certain number of years after the IRA is closed. In most cases, the minimum period id five years.

[Guest Owen]

Thanks to everybody, but most of all Janet...See I didn't think my contributions were made as recently as 99, 00 and 01. Fortunately I still had records from those years. Found the form that my brokerage had sent to the IRS for each of those contributions and I now have the paperwork I need.

Should have checked before posting...Sorry to have bothered all of you. Thank you so much!

Best,

Owen

[John G]

We are glad to be helpful. For each person that posts a problem or question, there are often many who are alerted to a problem or potential problem. You post gave us a good reason to talk about record keeping and various ways to cross check your information.

We have had dozens of posts about problems that could have been avoided if folks either kept better records, read the IRS/custodian rules carefully, or double checked their statements for accuracy.

That's three hints to the folks who want to keep Murphy at bay!