roth ira distribution + rollover of earnings?
57 yr old Client has roth with 20K of contributions, 10K in earnings, takes out 30K . Can he do a rollover of the 10K in earnings before the 60 days are up to avoid taxes and penalty on the 10K? He doesn’t have the full 30K for a rollover.
The 60 days are up this Sat. 5/1/10
THANKS! Matt OBrien
[email protected]
Permalink Submitted by Alan Spross on Tue, 2010-04-27 21:42
Matt,
Yes, he could do that. He would then report a distribution of 30k on line 15a, -0- on 15b and “rollover” entered next to 15b of Form 1040. The 20,000 that remains would be reported as a distribution on Form 8606 and under the ordering rules that 20,000 would be considered regular contributions and therefore tax and penalty free.
His remaining Roth would then be considered fully as earnings because all contributions had been distributed. Assuming he will have the 5 years satisfied by the time he reaches 59.5, in just a couple years he could take out the rest of the Roth tax and penalty free.
Note: the only reason he could not roll the 10k back would be if he had used up his one permitted rollover from this Roth account within the 12 months prior to the distribution date, ie any other distribution from this account after about 3/1/2009 that was rolled over would eliminate this present rollover. Barring that, if would be wise to get that 10k back into the Roth in the next couple of days.