Roth Ira withdrawal

[fesemagu]

Taxpayer opened a Roth Ira account in 2014 with an initial contribution of $5,500.00; In 2020, taxpayer withdrew his contribution and received a gross distribution of $8,596.00. Taxpayer turn 55 years at the time of withdrawal. Is he only liable for his earning of $3,096.00?

[TaxGuyBill · Accepted solution]

Yes, there is only tax and penalty on the earnings.  The withdrawal of the original contribution (Basis) is always tax-free and penalty-free.

[qbteachmt]

Have you read the instructions for Form 8915-E? It sure would be a shame to pay the early withdrawal penalty on this in a year where that requirement can be waived, if it qualifies.

https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras

https://www.irs.gov/pub/irs-pdf/i8915e.pdf