1099R code 2 for $13473 roth conversion of traditional IRA funds. Taxable, so far so good. Roth was opened in 2021. He has made contributions of $1650 to his Roth and had conversions of the aforementioned $13473 in 2023 and $5000 in 2021. He also has a 1099 R for $13200 with code J. I'm stumped on the penalty for early withdrawal. How much should it be?
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@taxesbydot wrote:
Contributions were $450 in 2021, and $600 each for 2022 and 2023.
$1650 is not subject to a penalty, but everything else is penalized.
[EDIT]: I'm assuming the withdrawal has not been "rolled over".
Pub 590B addresses this and details the ordering rules:
https://www.irs.gov/publications/p590b#en_US_2022_publink100089915
I love that we're halfway through Feb already and the 2023 pub hasn't been finalized yet. I find the PDFs easier to read/follow (especially if you have to use one of the worksheets) so it might be easier to read here:
https://www.irs.gov/pub/irs-pdf/p590b.pdf
Jump to Roth IRAs starting on page 31.
Or if you can tolerate the watermark on every page you can read the 2023 draft here:
https://www.irs.gov/pub/irs-dft/p590b--dft.pdf
"How much should it be?"
I didn't see the taxpayer's age.
"Roth was opened in 2021"
And it seems, unless there is another Roth account somewhere that was opened earlier, there is/are 5-year rules that weren't met, either (age of account, timeframe of basis contributions).
"I'm stumped on the penalty for early withdrawal."
I like to list the actions according to the timeline sequence. That helps identify penalties vs taxable actions.
Only one Roth - opened in 2021. He is in his early 30s. (sorry, that was an important detail).
That Basis of anything that he contributed directly to the Roth (not converted) is penalty free. Everything else has a 10% penalty.
Contributions were $450 in 2021, and $600 each for 2022 and 2023.
@taxesbydot wrote:
Contributions were $450 in 2021, and $600 each for 2022 and 2023.
$1650 is not subject to a penalty, but everything else is penalized.
[EDIT]: I'm assuming the withdrawal has not been "rolled over".
Thank you all so very much.
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