Roth IRA Early withdraw question?

Question

When i open my roth IRA account in March 2003, i was under the impression that i can take my contribution (not earning) out tax and penalty free if i am buying a house.

Last year in June 2006, i made a early withdraw to help pay the closing cost of a house. Now tax time come, and i found out about the 5 year rule. I did not qualify for the 5 year rules and now i need to pay tax again on the money i withdraw.

Is there any ways i can fix this mistake?

Answer 1

There is no way to sugar coat this, but you're out of luck.

The only possibility you *had* was if you paid the money back to the IRA within 60 days, but even then it might be tricky to get the money back in.

With all due respect to Rob's very thorough answer, your withdrawal still fails the 5 year test. If you try to ignore that part when you fill out your taxes, you'll be paying an additional fine when you get audited.

Answer 2

And ROTH IRA was started April 25 2011 and now this is June 17 2011. 2 months should NOT have very much earnings amount IF any after the fees that they will charge you for this distribution from your ROTH IRA account transaction for the tax year 2011. Chances are that you will NOT have any taxable amount included in this distribution BUT only the payer of the fund will know the correct answer so check with them and if they tell you that you will have a amount of this distribution that will be taxable income to you then tell them to withhold some $$ amount of federal income tax for this purpose as an estimated tax payment amount for the 2011 tax year. Any earnings amount will be subject to the 10% early withdrawal penalty amount since this is NOT a qualified distribution from this ROTH IRA account. Hope that you find the above enclosed information useful. 06/17/2011

Answer 3

Contributions you make to a Roth IRA are not tax deductible and therefore not subject to Federal Income taxes when they are distributed. If no amount of the distribution was due to Conversions or Earnings then the full distribution is tax and penalty free.
How to report this show the full amount of the distribution on line 15A of the 1040 or line 11A on the 1040. You would show -0- on line 15B or 11B accordingly and complete part 3 of the 8606

Publication 590
http://www.irs.gov/publications/p590/index.html

http://www.irs.gov/pub/irs-pdf/f8606.pdf

Update
The 5 year rule does not apply to contributions..
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. You may have to include part of other distributions in your income. See Ordering Rules for Distributions, later.
Pub 590 chapter 2

Answer 4

Only if you had put it back in within 60 days of the withdrawal. Unfortunately, you're well past that point.

Answer 5

there is an exemption to this 5 year rule which is if this is your first home then distributions are not taxable and there should be no penalty.