I’ve had my Roth with Schwab for maybe 15 years, and in that time have contributed maybe $50,000. I would like to pull out about $12,000 for an unforeseen bill. When I call to ask how this would work, the customer service lady explained they’d send me documents at year end with code J which tells the irs I owe taxes and penalties but there are additional forms to file with taxes that tells the IRS it’s tax and penalty free? Is this accurate? And if so what other forms would I need?
How to handle the distribution of Roth IRA contributions at tax time?
byu/tasselledwobbegong1 intax
Posted by tasselledwobbegong1
3 Comments
Yes, you will get a code J on the 1099-R if you are under age 59 1/2. Form 8606 Part III is used to report this.
Take a look at Part III https://www.irs.gov/pub/irs-pdf/f8606.pdf
If you use software, enter the 1099 and answer the questions. The program should populate the 8606.
Adding to what’s been said: As long as you’re taking out less than what you contributed, you won’t actually have to pay tax or penalties on what you’re now taking out. You can see that on part III of the 8606.
Also, after you complete Form 8606, save a copy of it indefinitely. You will need your most recent Form 8606 the next time you take a non-qualified distribution, even if it is many years in the future.