401k to Roth IRA rollover
401k participant rolled his (non Roth) after-tax funds (basis) to a Roth IRA.
The rollover created his only Roth IRA
He subsequently took a distribution of basis from his Roth IRA
Distribution occurred before 59 1/2
Does the 10% pre-59 1/2 “recapture” tax apply.
Thank you
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-11 14:54
If the rollover contribution to the Roth IRA was entirely basis (non taxable rollover), the 10% penalty will not apply to the Roth IRA distribution. This 10% recapture tax only applies to amounts that were taxable when rolled into the Roth IRA. If there were any taxable funds such as after tax sub account earnings rolled into the Roth IRA, any Roth IRA distribution would apply first to those earnings and the 10% recapture tax would apply to that amount.