Question

Distributions from a Roth IRA are made in a specific order. Assuming there have been no excess contributions, which of the following items is distributed SECOND?

Regular contributions.

Earnings on contributions.

The taxable portion of any conversions or rollover contributions.

The nontaxable portion of any conversions or rollover contributions.

Answer 1

Ans:

The tax treatment of a Roth IRA distributions depends on whether the distribution is qualified or Non-qualified distributions.

Qualified Distributions from Roth IRA are tax and penalty free.

Non-qualified Distributions could be subjected to tax and/or the 10% early distributions penalty.

To determine the source of assets distributed from a Roth IRA , the IRS uses the "Ordering rules"

the assets are distributed from the next source in the list:

1.regular Roth IRA contributions

2.taxable traditional IRA conversions and taxable rollovers from qualified plans, 403(b) or governmental 457(b) plans

3.nontaxable traditional IRA conversions and nontaxable rollovers from qualified plans and 403(b) plans

4.earnings on all Roth IRA assets.

which of the following items is distributed SECOND is Regular Contributions.

The following chart summarizes the tax treatment of Roth IRA distributions.

Distributed Assets	Qualified Distributions	Non-Qualified Distributions
Regular contributions	-Tax free -Penalty free	-Tax free -Penalty free
Taxable conversion/taxable rollover	-Tax free -Penalty free	-Tax free -Penalty may apply
Non- Taxable conversion/Non-taxable rollover	-Tax free -Penalty free	-Tax free -Penalty free
Earnings	-Tax free -Penalty free	-Tax free -Penalty may apply