Question

If I withdrew Roth IRA funds of amounts I contributed four years ago, why am I being charged IRA withdraw penalties now?

Answer

You must have a Roth IRA for five years before you can take a qualified distribution. It doesn’t have to be the same Roth IRA as the one you’re withdrawing from.

Roth IRA 2The five-year period starts on Jan. 1 of the first tax year you opened and funded a Roth IRA. It ends five years later on Dec. 31. This is a lifetime qualification. So, after you meet the holding-period requirement once for the first Roth IRA you own:

  • You’ll have met the holding periods for all Roth IRAs you own.
  • Regarding IRA withdraw penalties, you can take out earnings tax-free and penalty-free after age 59 1/2 — or earlier if you qualify for a Form 5329 exception.

Tax Reporting Help For Retirement Accounts and More…

No matter the type of retirement account you choose to open, there will likely be associated tax questions. At H&R Block, we’re here to help. With many ways to file your taxes, you can choose from in-office or virtual tax preparation. Keeping all tax considerations in mind–including your IRA accounts, we will provide an accurate tax return that maximizes allowable tax deductions and credits.

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How Do I Withdraw Excess IRA Contributions?

If you’ve contributed too much to your IRA for a given year, you’ll need to contact your bank or investment company to request the withdrawal of the excess IRA contributions. Depending on when you discover the excess, you may be able to remove the excess IRA contributions and avoid penalty taxes.