liquidate Roth IRA prior to age 59 1/2
client rolled a Roth 401k to Roth iRA in 2012.
how do we calculate what the tax and penalty would be for a full distribution prior to age 59 1/2 ?
client rolled a Roth 401k to Roth iRA in 2012.
how do we calculate what the tax and penalty would be for a full distribution prior to age 59 1/2 ?
Permalink Submitted by Alan - IRA critic on Wed, 2019-10-23 20:31
Form 8606 Part II must be completed. The form will ask for the regular contribution basis and the conversion basis (if any). Basis from the ROth 401k rollover must be combined with other Roth IRA basis. If the distribution was for more than basis, it means that earnings were distributed. Any earnings would be subject to tax and penalty. Also, if there were any pre tax conversions done in the last 5 years, there would be a 10% penalty for distribution of those conversions. Therefore, if the client has not kept organized records, it could take some work to reconstruct the amount of basis in the Roth IRA needed to correctly complete Form 8606.