Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year

L1: Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year
Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year conversion basis available? (The forum needs to allow longer titles!)
This is for a new SEPP plan, and the question involves breaking a SEPP before the 5-year, age 59.5 date.

While admiring my wonderful spreadsheet to carefully track my laddered Roth conversions over the years, a thought popped into my mind: if I am doing my Roth distributions as part of a 72(t) plan – this will be something that I will have my custodian set up and therefore be responsible for – and I decide to prematurely end it, if my distributions have not exceeded the 5-year Roth conversion basis, would I have any increase in tax liability? I ask this because it sure seems that if I start doing such a 72(t) plan, I necessarily have to account for those distributions against conversion basis, and because it seems that the extra tax liability incurred by breaking the plan is in essence like a recharacterization of those distributions. This would allow for a pain-free ceasing of the plan if I am still in the positive for 5-year conversion basis – in essence allowing me to choose to have a lower time commitment that the 5 years (i.e., any time while still distributing 5-year conversion basis would be free).
2018-02-21 08:49, By: swampwiz, IP: [194.114.130.113]

L2: Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year
Fyi… A title is a title and not a statement or question. Maybe I will shorten the length.
2018-02-21 13:31, By: Gfw, IP: [172.9.118.235]

L2: Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year
If you bust a 72t plan using a Roth IRA, the retroactive penalty will apply to the amounts that would have been penalized had you just taken non SEPP Roth distributions. The Roth IRA ordering rules still apply with your regular contributions out first tax and penalty free, then your Roth conversions, oldest first. If you distributed a conversion before 5 years, the taxable portion of that conversion is subject to the 10% penalty. And if you distributed any Roth earnings, the earnings will also be subject to the 10% penalty. You would report the retroactive penalty on Form 5329 for the year you busted the plan and would have to include a detailed explanation with that form.
If you have a large enough Roth, you may not even need a 72t plan since your regular contributions come out first. You could set up a SEPP with your TIRA as usual, and if that does not generate the amount you need, you could tap the Roth tax free up to the point where you are tapping conversions under 5 years.
It’s pretty easy to get tripped up if your SEPP is overly complex. You might make an error and/or the unusual structure might trigger an IRS inquiry.
Can be more specific if you explain why you plan on using your Roth for the SEPP. TIRA too small?
2018-02-21 16:33, By: Alan S, IP: [24.117.172.15]

L3: Would breaking a 72(t) of a Roth be free of the 10% penalty if there is 5-year
You could get better answers if you gave better information.
If you recently started the SEPP 72-T plan, then the cost terminated it would probably be minor.
How much were your ROTH CONTRIBUTIONS, and when was the first one ?
How much were your ROTH CONVERSIONS, and the dates for each of them?
As Alan stated, CONTRIBUTIONS to ROTH IRA can be withdrawn TAX FREE at any time.
CONVERSIONS to ROTH IRA can be withdrawn TAX FREE up to the amount that was taxed upon conversion or rollover, plus any basis from non-deductible contributions.
EARNINGS from ROTH IRA can be withdrawn TAX FREE after age 59 1/2, if the ROTH IRA was initially CREATED more than 5 years ago. Distributions do not apply until all CONTRIBUTIONS and CONVERSIONS have been distributed.
The SEQUENCE of distributions from a ROTH IRA is CONTRIBUTIONS first, then taxed CONVERSIONS second, then non-deductible portion of CONVERSIONS, and finally EARNINGS. If the EARNINGS are distributed before age 59 1/2, these are taxable, and subject to the 10% penalty for early distributions.
2018-02-21 19:21, By: dlzallestaxes, IP: [173.75.252.16]