Roth Distribution 10% penalty
Client has a Roth IRA started with contributions but not open for 5 years. They took a full withdrawal including all earnings after age 59 1/2 but before the 5 year period was met. I know tht the earnings are taxable, but is the 10% penalty accessed as well?
Permalink Submitted by Alan - IRA critic on Wed, 2015-01-28 20:42
The earnings are taxable since the Roth was not qualified, but there is no 10% penalty because the earnings were distributed after 59.5. The 1099R should not show the J code (early distribution). The 1099R code should be T, which reflects that the custodian knows there is no penalty, but they do not know if the distribution is qualified or non qualified because they do not know what year the client first contributed to any Roth IRA.