Roth IRA

[Ken]

I have a client who put 15000 dollars into a Roth IRA last year and then this year he took it out to pay off a debt. doe's he have to pay any tax on this? He is not 591/2 and the Roth is not 5 years old.I was thinking he would probably have to pay a penalty. Is this so?

[ChEAr$]

Boy howdy!

I have a client who put 15000 dollars into a Roth IRA last year and then this year he took it out to pay off a debt. doe's he have to pay any tax on this? He is not 591/2 and the Roth is not 5 years old.I was thinking he would probably have to pay a penalty. Is this so?

There IS a problem, for Roth IRA contributions are based on same rules as regular ones,
i.e. maximum dollar limitations and based on earned income!

Best he contact custodian to "arrange" that nothing ever took place, except of course for the fact
that he will pay tax on any earnings.

Yes, that can be done.

[Roland Slugg]

Conversion?

Since $15,000 is well above the annual "contribution" limit, I'm assuming it was a conversion, not a contribution, per se.

The $15k can be taken out prior to age 59½ or 5 years, but any excess ... i.e. earnings ... will be taxable and subject to the 10% penalty. In any case the distribution must be reported on F-8606.

[JoshinNC]

Maybe it was a ROTH 401K?

I have a client who put 15000 dollars into a Roth IRA last year and then this year he took it out to pay off a debt. doe's he have to pay any tax on this? He is not 591/2 and the Roth is not 5 years old.I was thinking he would probably have to pay a penalty. Is this so?

too much to be a ROTH IRA contribution, although it could have been a conversion.

[Ken]

Roth IRA

I'm sorry, I tried to make this too simple. Actually the amount was around 7,500 each for both husband and wife. It added up together to around 15,000 dollars.
They say they did'nt make any money on the thing and after reading what I could find on the subject, I guess if there was no gain then there will be no penalty.

Thanks for your answers