early withdrawal penalty from Roth IRA?

Dear Charlie: Seems like you are getting some conflicting info. Roth contributions are after tax contributions and can be with drawn at anytime tax and penalty free (10 minutes or 10 years). Your earnings are the other part of your question ($570) and have special rules. Your earnings must satisfy two requirements (1) age 59 1/2 and (2) 5 years in the account. Earnings when withdrawn are taxed and if they do not meet the test above 1&2 they will have the 10% penalty.

See IRS Pub. 17 page 118-130 and IRS Pub 590

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more.

Errol Quinn Enrolled Agent Master Tax Advisor

The penalty should be on just the $570, but you need to make sure you complete Form 8606 to declare the "basis" amount of $4,000 and make sure you have the documents to prove that.

I know it's too late now, but the smart thing to have done was to leave the $570 alone. Now you're going to pay a $57 penalty on top of the taxes due on that $570....I'm guessing you're in the 15% bracket, so that's $85.50 for a total of $142.50 in taxes/penalties. That's an awful lot to surrender for just $570, or a net of $427.

Per above...the 5 year penalty does not apply. The 5 year penalty applies to cases when a 401k or Regular IRA is converted to a ROTH. If yours was a ROTH from the beginning, it doesn't apply and the basis is tax free.

I have a very similar situation to yours. I wanted to withdraw $4000, which is what I initially invested, but my financial adviser misunderstood me and instead had the company cut me a check for the full amount in my account, which grew to $4900 (so I got an extra $900 that I never WANTED to pull out). I called him as soon as I got the check and he informed to return the difference within 60 days and that I would be OK. I went back to his office before the 60 days were up and gave him a check for $1000 to put back into my Roth IRA account. All in all, I only received $3900 so even though there was this mishap, do I still have to report it to the IRS? I received a bunch of 1099 R's all totaling $4900, BUT I did return all of the $900 of gains (plus additional $100) within 60 days of receiving the distribution. Some have told me that I don't have to do anything, some have told me that I should report this...ugh...I'm so confused. The worst part is that I do my own taxes and I don't want to spend needless money to ask just this one question...everything else on my taxes is very straight forward so I don't want to have to hire a tax person this year just for this. Hopefully someone has some good input for you that I might benefit from as well. Thanks for posting your question on here.

Before you invest in a ROTH. - Do you have 6 months worth of living expenses in a savings account or brokerage? - Do you have your cars paid off? - Are you putting the max into the 401K? - If you will need a new car soon, do you have the money to buy it for cash? - Are all your credit cards paid off completely. Opening a ROTH is a very smart decision. But you NEED to be financially stable before taking that step. The penalties are not bad since you already took out taxes on it. 10% if within 5 years /

Qualified distributions from Roth IRA are not taxable. It must meet the following requirements.

1. Distribution is made after the 5-year period beginning with the first taxable year for which contribution was made to a Roth IRA set up for your benefit, and

2. Made on or after the date you reach 59 1/2, made because you are disabled, made to a beneficiary or to your estate after your death, or pay up to $10,000 (lifetime limit) of certain qualified first-time home buyer amount.

If the distribution is not qualified, you will pay 10% early withdrawal penalty on the whole amount of $4570.

Read about Trad IRA and Roth IRA http://taxipay.blogspot.com/2008/05/traditional-ir...

top contributors strike again...they both are absolutely wrong...top contributors selected based on knowledge my butt...contributions to a roth ira can be withdrawn at any time tax and penalty free...you will only pay tax and penalty on the 570 in earnings.

How long ago did you open the account?

There is a 5 year rule that can ding you penalty on contributions.

The earnings are dinged both as income and as subject to the penalty.