Taxable Roth IRA Distribution and Tax Due
A client is taking an early distribution from a Roth IRA that is subject to the 5-year rule. When is the 10% early withdrawal penalty actually due? Should they make an estimated tax payment this year to cover it, or can they simply pay any taxes and distribution penalties when they file next April? Said differently, is a taxable Roth IRA distribution tied to a specific quarter or just the calendar year?
Permalink Submitted by Alan - IRA critic on Tue, 2025-04-22 11:03
The taxable portion is subject to tax or penalty like any other income such as wages with payment due on 4/15. However, taxes paid by quarterly estimates are due equally throughout the year, but withholding can be done any time in the year and still be treated as paid equally throughout the year.
You are probably referring to a distribution that includes taxable conversions done within the last 5 years, but the balance of regular Roth contributions can be withdrawn tax and penalty free anytime. Conversions then come out by age of the conversion, so any conversions done over 5 years back are tax and penalty free. As a result of these “ordering rules” for distributions, many early Roth distributions are tax and penalty free.