How to Report Distributions From Roth IRAs

Congress passed Roth individual retirement accounts into law to offer an after-tax alternative to traditional IRAs. This means qualified distributions can be taken tax-free from the account. However, the Internal Revenue Service still requires all Roth IRA distributions to be reported on your taxes. In addition, since contributions to the account do not result in a tax deduction, the contributions can be taken out tax-free. However, early withdrawals of contributions are subject to income taxes.

Things You'll Need

• Form 8606
• Form 5329
• Form 1040

Instructions

1. Complete Form 8606 if you are taking a non-qualified distribution from your Roth IRA. Non-qualified distributions occur when money is taken out before the account is at least five years old or before the account holder is at least 59 1/2 years old. Completing this form will tell you how much of your distribution is taxable and how much is tax-free. This form must be included with your income tax return.

2. Complete Form 5329 if you take a non-qualified distribution. This form will calculate the 10 percent early withdrawal penalty you will owe unless you have an exception, such as medical expenses above 7.5 percent of your adjusted gross income. The penalty is reported on line 58 of Form 1040.

3. Report the taxable portion of your Roth IRA distribution on line 15b of Form 1040. This amount counts as taxable income on your income tax return.

4. Report the nontaxable portion of your Roth IRA distribution on line 15a of Form 1040. Though this amount does not get taxed, the IRS still requires you to report it.

References

• Internal Revenue Service: Publication 590 (Chapter 2)
• Internal Revenue Service: Form 5329 Instructions
• Internal Revenue Service: Form 8606 Instructions

Resources

• Internal Revenue Service: Form 5329
• Internal Revenue Service: Form 8606
• Internal Revenue Service: Form 1040