Roth IRA Distribution – Prior to 59 1/2
Client took a distribution from a separately held Roth IRA about one week before reaching age 59½. The Roth IRA has been open for several years (+5yrs), so the distribution likely consists primarily of earnings rather than contributions.
Will this distribution be coded as a premature distribution since it occurred prior to 59½?
Additionally, could we mitigate this by completing a 60-day rollover into a new Roth IRA and then taking the distribution again after the client turns 59½?
Is this one of those things that the client should just not worry about?
Permalink Submitted by Alan - IRA critic on Thu, 2025-07-17 17:30
The 1099R will show code J for an early Roth IRA distribution, however such early distributions are treated as coming first from the Roth regular contribution basis, then from conversions in chronological order, and last from gains. So if the client is sure that the distribution is less than the total regular contributions and conversions done over 5 years ago, it will be tax and penalty free as reported on Form 8606.
You mention a “separately held” Roth IRA, but if that means that client owns more than one, for tax reasons they are all combined as if a single Roth. So it does not matter which particular Roth account the distribution was taken from because Form 8606 is completed as if there was only a single combined Roth IRA.
Perhaps the client has not been keeping track of the total of regular Roth IRA contributions, but if client is sure that the distribution is less than the total of these contributions, it will be tax and penalty free.