Roth and 72t

You are here:
< Back

L1: Roth and 72tI plan on taking my cost basis from my ROTH this year and separately starting a 72t NOT using my ROTH amount in the calculation. Will the fact that I am taking my ROTH basis affect my 72t with the iRS?2017-02-16 14:25, By: Bri, IP: []
L2: Roth and 72tIt sounds like you are not including your Roth in your 72t plan, which is typical. But you do want to distribute your cost basis from regular contributions tax and penalty free. This is OK although it will result in line 15a of your return being higher than your 72t distribution. Be sure to correctly file Form 8606 reporting the Roth distribution.
Now if you plan on distributing any CONVERSION cost basis from your Roth IRA, you will owe the 10% penalty on the pre tax portion of any conversion not held for 5 years. Oldest conversions come out before more recent ones. The 72t will not waive this penalty, but if you needed to distribute a large amount of conversion dollars subject to the penalty, you might consider INCLUDING the Roth in your 72t plan. The 72t penalty exception would then waive the 10% penalty on the conversion dollars under 5 years that you distribute from the Roth. This will make your plan more complex and subject to errors and the IRS may not initially recognize that this is OK, so do not this unless the amount of tax savings justifies the added risk.2017-02-16 16:59, By: Alan S, IP: []

L3: Roth and 72tI suggest that you meet with a tax professional who is familiar with SEPP 72-T.
Also, you might get some valuable information if you posted information about your situation, such as DOB, amount in your Traditional IRA (and any non-deductible basis), amount in your ROTH IRA (and the date of the first contribution, even if 30 years ago, and the date and amount of each conversion to your ROTH because each one starts a new 5-year holding period), and how much you want to generate in cash flow (and where you will be getting the funds to pay the applicable taxes).
Further, are there any other exclusions that you qualify for to avoid the 10% penalty for an early distribution ? What do you want/need the money for ? ( Hopefully it is not a ROBS — Retirement Owned Business using a self-directed IRA.)2017-02-16 17:12, By: dlzallestaxes, IP: []