Early Roth IRA distribution

[BP.]

I'm not a whiz on the early Roth distribution topic, so I do appreciate your help, guys.

Taxpayer, age 38, has contributed about $4,000 to her Roth IRA account, starting about 4 years and 4 months ago.

She'd like to take an early distribution, which'll be her first one, of about $2,000 this month.

This is tax free and penalty free, correct, because the distribution doesn't exceed total contributions?

Ref TTB 13-5.

Thanks!
Barb

[joanmcq]

yeah, as long as it wasn't a rollover, she can take out the contributions.

[Mo Sheets]

5 Year Holding Period

TTB - Page 13-14

I thought the 5 year holding period was still applicable to the Roth IRA for tax-free distributions. Maybe another member can clarify for us.

Mo

[Bees Knees]

TTB - Page 13-14

I thought the 5 year holding period was still applicable to the Roth IRA for tax-free distributions. Maybe another member can clarify for us.

Mo

The 5 year holding period applies for purposes of a distribution qualifying as a tax-free distribution (TTB p. 13-14). Under the ordering rules discussed on page 13-5, distributions always come out of contributions first and are tax-free, then they come from conversions and are tax free to the extent the converted amounts were taxed upon the conversion, and then last out of earnings. The distributions out of earnings are where the 5-year rule comes into play. If the 5 year rule is not met, the distributions that represent earnings are taxable. Distributions from contributions and taxable conversion contributions are always tax free with no regard to the 5-year holding period rule.