Client Question-Roth IRA

Q: My Client wants to take a$60,000 distribution from his Roth IRA. The distribution is going to pay his grandson’s college tuition, books, supplies, and his room and board. His question is will he pay taxes on the entire distribution.

A: The IRS considers the money that is taken out on a Roth IRA to be a return of your contributions into it first and a return of earnings afterwards. My client has contributed more than $60,000 to his Roth IRA. Since his Roth IRA has been opened for at least 5 years, the distribution is considered a Qualified Distribution and is not included in taxable income. If he was younger than 59.5 years old, he would not have to pay the 10% penalty tax on early distribution either.

Please call me at (610)353-0686 or contact me at newtownsquaretaxservice.com to schedule your wealth retention consultation.

Warmly,

Stephen Venuti, CPA

Client Question-Roth IRA