Roth Deferrals - Non-qualified Distribution Earning below $200

[AdKu]

Is this permissible not to apply the 20% mandatory tax withholding to a Non-qualified Roth Deferrals Distribution when the earning is below $200?

[ETA Consulting LLC]

I think it is permissible not to withhold.  The withholding applies to what IRC 3405 terms as "Designated Distributions"; and does not include amounts that aren't included in gross income.  So, with the mindset, I'd say if the "taxable distribution" doesn't exceed $200, then I wouldn't withhold.

Good Luck!

[AdKu]

Thank you ETA Consulting LLC.

 

 

[AdKu]

Is Code B the correct distribution code to use for 1099-R line 7 when making non-qualified distribution from designated Roth account?

 

[ETA Consulting LLC]

Not sure on your exact fact pattern, but you'd use "B" in conjunction with a number.  Let's say you have a Roth Account with $1000 in Contributions and $1000 in Earnings for a total of $2000.  You take the nonqualified distribution in cash because you terminated in a year prior to age 55.
1099R  -
Total Distribution $2000
Taxable Amount $1,000
Box 7   B1
This tells the story.  Roth distribution of $2000 where $1000 was already taxed.  Since it is "Early" (e.g. "1") you have a $1000 taxable event in an excise penalty on the whole $2,000.

Now, same fact pattern except the individual was age 55 in the year of termination.  Box 7 would, then, be "B2".  This says $1000 is taxable but all is exempted from excise penalty.
 

Good Luck!

[AdKu]

Thank you very much!!!