When inheriting a Roth IRA you have to transfer the original Roth IRA funds into a custodian beneficiary Roth IRA account, but its not clear if the beneficiary's account or the original owner's account needs to have existed for 5 years for earnings to be tax free. Does the original owner or the beneficiary need to have held ownership of the Roth IRA funds for over 5 years for the distributed earnings to be tax free?
Eight years ago, I retired at the age of 50 after serving 30yrs with my employer. Since my retirement, I am paid a bi-weekly salary through the company's pension plan. Every year, I am sent a 1099-R for tax purposes. Since my retirement salary is paid from the company's retirement account and not my IRA, must I still have to pay a 10% penalty, being that I haven't reached the age of 59 1/2 yet? My tax preparer seems to think so.
Hi mam 🙏🏻 your videos are great. I have a doubt for early withdrawal penalty on Roth ira For example-- Currently a person is 58 years old. He made a contribution of 6000 to his Roth IRA when he was 50 years old. The contribution has grown to 9,999 in the current year. And he takes out the entire distribution and uses it to buy his first home. So will the earnings be taxed at ordinary rate as he is not 59.5?? Or earnings will also be tax free just like the contribution?? Earnings will not be subject to penalty because exception applies.
If the box 2b total distribution is checked, does that mean that the account is closed and not taxable, also should not report it in the line 5b of 1040?
Hi Govind, If box 2b is marked as total distribution, it means that the account's entire balance is distributed (and probably the account was closed). It does not indicate whether it is taxable or not; that would be in Box 2a. If you have the same amount in Box 1 and 2a and Box 2b taxable amount not determined, it may need to be calculated (which can be complicated). Here are instructions for 1099-R: www.irs.gov/pub/irs-pdf/i1099r.pdf The first thing to know is to enter the information EXACTLY how you have it on your 1099-R, and these forms are required to be filed with your tax return. Good Luck! 🍀
Hello Laurdes, If you took money out in 2023 from your 401(k) then you will receive a tax form in early 2024 to report on your 2023 taxes. You must ensure you include that 1099-R on your tax return. It also depends if any of the money you took from your 401(k) will be taxable? If you rolled it over to another retirement plan within 60 days, some or none can be taxable. If you move it to a ROTH plan, most likely, it would be taxable. However, if you rolled over to another qualified plan, the information on your 1099-R would be just informational and reported but the amount may not be taxable. If you took the money and used it to pay for qualified medical expenses (or other reasons that are listed as exceptions: www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions) then you could exclude that amount from being taxable. The most important thing to remember is if you are rolling the money over, don’t miss the 60-day window. Also, include the 1099-R that you will receive in Jan 2024 on your 2023 tax return. You are doing all the right things at this point - asking questions way before your 2023 tax return. Thank you & good luck!
Very helpful and wonderfully explained!
Very well explained. Thank you
I am so glad it was clear @manismultitasking9757! Thank you!
Thank you!
Thank you
Thank you 🙏🏾 Very helpful
Can you have a video on home office tax calculations.Thanks
Thank you for your suggestion Upendra.
When inheriting a Roth IRA you have to transfer the original Roth IRA funds into a custodian beneficiary Roth IRA account, but its not clear if the beneficiary's account or the original owner's account needs to have existed for 5 years for earnings to be tax free.
Does the original owner or the beneficiary need to have held ownership of the Roth IRA funds for over 5 years for the distributed earnings to be tax free?
Eight years ago, I retired at the age of 50 after serving 30yrs with my employer. Since my retirement, I am paid a bi-weekly salary through the company's pension plan. Every year, I am sent a 1099-R for tax purposes. Since my retirement salary is paid from the company's retirement account and not my IRA, must I still have to pay a 10% penalty, being that I haven't reached the age of 59 1/2 yet? My tax preparer seems to think so.
Hi mam 🙏🏻 your videos are great.
I have a doubt for early withdrawal penalty on Roth ira
For example--
Currently a person is 58 years old. He made a contribution of 6000 to his Roth IRA when he was 50 years old.
The contribution has grown to 9,999 in the current year.
And he takes out the entire distribution and uses it to buy his first home.
So will the earnings be taxed at ordinary rate as he is not 59.5?? Or earnings will also be tax free just like the contribution??
Earnings will not be subject to penalty because exception applies.
If the box 2b total distribution is checked, does that mean that the account is closed and not taxable, also should not report it in the line 5b of 1040?
Hi Govind,
If box 2b is marked as total distribution, it means that the account's entire balance is distributed (and probably the account was closed). It does not indicate whether it is taxable or not; that would be in Box 2a.
If you have the same amount in Box 1 and 2a and Box 2b taxable amount not determined, it may need to be calculated (which can be complicated).
Here are instructions for 1099-R: www.irs.gov/pub/irs-pdf/i1099r.pdf
The first thing to know is to enter the information EXACTLY how you have it on your 1099-R, and these forms are required to be filed with your tax return.
Good Luck! 🍀
why box 1 is less than the RMD amount on 5498?
Hello, what do I need to do if my 1099R will be issued in Jan 2024 for the Feb. 2023 withdrawal from 401(k)?
Hello Laurdes,
If you took money out in 2023 from your 401(k) then you will receive a tax form in early 2024 to report on your 2023 taxes. You must ensure you include that 1099-R on your tax return.
It also depends if any of the money you took from your 401(k) will be taxable? If you rolled it over to another retirement plan within 60 days, some or none can be taxable. If you move it to a ROTH plan, most likely, it would be taxable. However, if you rolled over to another qualified plan, the information on your 1099-R would be just informational and reported but the amount may not be taxable.
If you took the money and used it to pay for qualified medical expenses (or other reasons that are listed as exceptions: www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions) then you could exclude that amount from being taxable.
The most important thing to remember is if you are rolling the money over, don’t miss the 60-day window. Also, include the 1099-R that you will receive in Jan 2024 on your 2023 tax return. You are doing all the right things at this point - asking questions way before your 2023 tax return.
Thank you & good luck!
Hey I got a 401 from my spouse early do I put code 2 or 4 in box 7
@taxguide101 what if my box 1 and 2a is different what do i click in box 2b