- quote -

Thank you all for the clarification. I re-read Pub 590 and
realized that I was being confused by the early distribution
penalty on withdrawals from converted IRAs. As I now
understand, if I convert a traditional IRA to a Roth IRA and
withdraw the entire balance less than five years later, I
pay a 10% penalty on the entire amount as well as regular
taxes on any earnings. Is this correct?

Does anyone know whether California follows the same rules
as the IRS for taxing/penalizing early distributions from
Roth IRAs?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Pedro wrote:

- quote -

You have a disqualifying disposition. Your return of capital
($4000 of contributions) is not taxed. $1000 is taxed and $1000
is subject to the 10% early withdrawal penalty.

- quote -

No change.

--
Alan
http://taxtopics.net

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

Pedro wrote:

- quote -

Only the earnings, not the contributions.

- quote -

The earnings ($1,000) are subject to ordinary tax AND an
early-withdrawal penalty of 10% ($100), which depends on
your age, not how long you have held the Roth account.

- quote -

No change. Taxes and penalty will be the same, as you still
are not over age 59-1/2 at age 40.

In your reading of Pub 590, you seem to have missed the fact
that your contributions are made after-tax, and can be
withdrawn AT ANY TIME. The "five-year" condition you are
hung up only applies to "Qualified Distributions", which
also require that you be over age 59-1/2.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"Pedro" <pshafer[at]hotmail.com> wrote:

- quote -

$1,000 taxable income, all of which is subject to the
penalty. Your $4,000 contribution is returned without tax
or penalty.

- quote -

It doesn't.

--
Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"Pedro" <pshafer[at]hotmail.com> writes:

- quote -

$1000 ($5000 minus $4000) is taxed and penalized.

- quote -

Same answer.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

After reading pub590 regarding the early distribution
penalty for making withdrawals from a Roth IRA, I'm still
confused about which portion of that contribution gets
penalized.

Let's suppose the situation is this: I make a $4000
contribution to a Roth IRA and three years later the account
is worth $5000. I've made no rollovers, conversions or
anything of the sort. I'm 30 years old and decide to
withdraw the entire balance. How much of that withdrawal is
taxed, and additionally, how much is penalized?

How does the situation change if I wait until I'm 40 to make
the same withdrawal?

Thanks,
Pedro

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >