Are Roth IRA Distributions Reported on the Federal Adjusted Income?

You can use form 1040 to report your Roth IRA distributions.

Roth individual retirement accounts provide a way for people to save for retirement on an after-tax basis. This means that contributions to the account do not decrease your adjusted gross income in the same way that contributions to a traditional IRA would, but that you can take tax-free qualified withdrawals. However, you need to know how to report all Roth IRA withdrawals on your federal income taxes.

Income Tax Reporting

If you have a Roth IRA distribution, you must report it on your federal income taxes using either Form 1040 or 1040A, even if the distribution results in no tax liability. You should receive a 1099-R from your financial institution that records your total distributions for the year, as well as the taxable portion, if any. If you have nontaxable withdrawals, report them on either line 11a if you use Form 1040A, or line 15a if you use Form 1040. If you have taxable withdrawals, report them on line 11b of Form 1040A or line 15b of Form 1040.

Early Roth IRA Distributions

If you take a non-qualified Roth IRA distribution, often referred to as an early distribution, you may incur tax liability and early withdrawal penalties. When you take an early distribution, only the earnings are taxable. To determine if your withdrawal includes earnings, complete Form 8606. If you have earnings, you have to include that amount as a taxable IRA withdrawal on your income taxes and pay a 10 percent early withdrawal penalty. However, you might be able to avoid the penalty if an exception, such as college costs for yourself, your spouse or your child, applies.

Qualified Distribution

Knowing whether your distribution from your Roth IRA is qualified or not will determine how you report the withdrawal on your federal income taxes. A qualified distribution from a Roth IRA meets two conditions: at least five tax years have passed since you opened your Roth IRA, and you are either 59 1/2 or permanently disabled. Also, if your Roth IRA has been open for at least five tax years, you can take a qualified distribution of up to $10,000 for the purchase of a first home.

Withholding On Early Withdrawals

If you take an early distribution from your Roth IRA, your financial institution may withhold money for the federal income taxes that you might owe. If so, the amount will be reported in box 4 of your Form 1099-R. This amount is added to your other federal income taxes withheld, such as withholding done by your employer, and reported on either line 61 of Form 1040 or line 38 of Form 1040A.

References

• Department of the Treasury, Internal Revenue Service: Publication 590 Individual Retirement Arragements (IRAs)
• The Motley Fool: The Roth IRA Part IV: Early Withdrawals

Resources

• Internal Revenue Service: Form 8606
• Internal Revenue Service: Form 5329
• Internal Revenue Service: Form 1040
• Internal Revenue Service: Form 1040A
• Internal Revenue Service: Form 1099-R