How to Report Multiple Non-Qualified Distributions From Pensions & Roth IRAs
The Internal Revenue Service, or IRS, discourages early distributions from individual retirement accounts, or IRAs, and pension plans by imposing early distribution penalties. Sometimes, however, your financial situation requires you to take money out early. In those cases, you need to report your early distributions on your income taxes. Your financial institution mails you a Form 1099-R to document your distributions at the end of the year, but you need to report them properly on your income taxes. Though you can take out contributions early from your Roth IRA, you have to pay taxes and penalties on the earnings and any pension withdrawals.
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Instructions
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Complete IRS Form 8606 to determine the portion of your Roth IRA distribution that comes from contributions and the portion that comes from earnings. You must report the contributions on your taxes -- the funds will not incur any taxes or penalizations; your earnings, however, will.
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Report the amount of your Roth IRA contributions withdrawn on line 15a of Form 1040. These amounts are not taxable.
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Report the amount of your Roth IRA earnings withdrawn on line 15b of Form 1040. These amounts will be taxed.
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Report the amount of your pension distribution on line 16b of Form 1040. You will also incur tax on these amounts.
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Complete Form 5329 to calculate the early withdrawal penalty. Enter the amount of your Roth IRA earnings taken out plus your pension distribution. At the time of publication, the penalty equals 10 percent of the taxable portion of the withdrawals. For example, if you had $10,000 in Roth IRA contributions, $5,000 in Roth IRA earnings and $8,000 in pension distributions, you would have $13,000 in taxable non-qualified distributions and would owe a $1,300 penalty.
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Report the amount of the penalty on line 58 of your Form 1040. This amount adds to your taxes due.
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