Distribution From Roth

[Guest jfreeborn]

Hello everyone

I plan on taking a distribution from my Roth this year. The distribution will be less than my total contributions and my account was opened in 2005. Am I correct that there will be no income tax accessed and no penalty? There were no rollovers or conversions. The money in the account was just from my contributions of cash from 2005 to the present. Also, how do I prove to the IRS that my distribution was less than the total contributions put into the account?

Thanks as always!

[K2retire]

Are you over age 59 1/2?

[masteff]

Might want to review Pub 590 which explains things such as the ordering rule for distributions. It also explains qualified distributions versus other distributions (which K2 was getting at w/ his question). http://www.irs.gov/pub/irs-pdf/p590.pdf

[mbozek]

Hello everyone

I plan on taking a distribution from my Roth this year. The distribution will be less than my total contributions and my account was opened in 2005. Am I correct that there will be no income tax accessed and no penalty? There were no rollovers or conversions. The money in the account was just from my contributions of cash from 2005 to the present. Also, how do I prove to the IRS that my distribution was less than the total contributions put into the account?

Thanks as always!

See IRS pub 590 P 68. If the amount contributed to the Roth is less than the amount of all your Roth IRAs you can claim a loss as a miscellaneous deduction. You dont need to be 59 1/2 to withdraw contributions.

[Guest jfreeborn]

Yes I am under 59 1/2. Thanks for the responses.

[John G]

You can always withdraw the cash contributions without any issues. You don't need to prove anything, but do keep good records such as the end of year summary for each year of the Roth which will show contributions made for that year.

If the value of the Roth is less than what you contributed, you have a second question about if you can write off a loss. It was not clear to me that you meant the the total value of the account was less than the total contributions.

Taking a loss involves complicated math based upon ALL of your IRA/Roth accounts. You can't just cherry pick on account that went down.

Post again if you want info on the tax loss issue.

[Lori H]

Let me piggy back on this topic....what if total contributions, straight cash, were $9500, $9000 was withdrawn in 2012, balance as of today after withdrawals was $5000. Account holder is under 59.5 and wants to with draw the additional $500 in contributions plus the gain to put towards the cost of a new house. It seems as if there is an exception for a house purchase however that is for first home. This is the holders 2nd, but PUB590 states "that you are generally a first time buyer if you had no present interest in a main home during the 2 year period ending on the date of acquisition of the home which the distribution is being used to build" sounds to me like you can be a previous home owner as long as it was over 2 years. Do I interpret this correctly? ROTH was started in 2002.

[masteff]

Code Section 408A(d)(2)(A)(iv) says a qualified distribution includes a "qualified special purpose distribution". 408A(d)(5) defines a "qualified special purpose distribution" by reference to 72(t)(2)(F) which is the first time home buyer exception. That then takes you to 72(t)(8)(D)(i) which is the basis for what you read in Pub 590 about the 2-year period of nonownership.

"(D) First-time homebuyer; other definitions

For purposes of this paragraph—

(i) First-time homebuyer The term “first-time homebuyer” means any individual if—

(I) such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this paragraph applies, and

(II) subsection (h) or (k) of section 1034 (as in effect on the day before the date of the enactment of this paragraph) did not suspend the running of any period of time specified in section 1034 (as so in effect) with respect to such individual on the day before the date the distribution is applied pursuant to subparagraph (A)."

(And for the purpose of (II), it's highly unlikely that section 1034 applies given it was repealed by TRA97 http://www.law.cornell.edu/uscode/text/26/1034 )