Form 8606

[STJW]

I had to take a nonqualified distribution from my Roth IRA in 2018 due to emergency circumstances. I'm a bit confused how to figure out my tax liability (if any) on Part III.

My Line 22 basis is about $30,000 (total contributions since around 2007). The early distribution I took in 2018 was $2,000. I contributed $1,050 to the IRA in 2018.

Is my tax liability therefore $950? What if I were to contribute $950 before the end of the tax year? Would that eliminate any tax liability?

Thanks so much.

 

[FlyingRon]

There's not enough information to answer. You only get to offset the withdrawal with money you put back within 60 days. If the contribution was made before the tax withdrawal or more than 60 days after, it doesn't count.

Any withdrawn but not replaced within the 60 day window amounts are subject to the 10% penalty. In addition, if there were "earnings" in the account that exceed the amount, you owe regular income tax on the withdrawal as well (you lose the tax preference that Roth earnings would otherwise get).

 

[STJW]

Thanks for that FlyingRon. Since Line 23 on Form 8606 is zero (see below) I have nothing to enter on Form 5329. This was a one-time withdrawal of contributions, not earnings. It's just that my basis has dropped to $28,000. As I interpret it there is no tax owed.

 

[STJW]

Can anyone please confirm I am correct with the above?

 

[LdiJ]

Can anyone please confirm I am correct with the above?

If your numbers are accurate then it looks good to me.