Questions and Answers
One of our IRA owners opened a Roth IRA at another financial organization more than five years ago. He recently transferred his Roth IRA to our financial organization. He is over age 59½ and wants to know if he is eligible to take distributions without tax or penalty. How should we report his distributions on IRS Form 1099-R?
A Roth IRA owner is always able to take distributions of regular contributions without income or penalty tax. Your IRA owner is at least age 59½ and established a Roth IRA more than five years ago, which satisfies the requirements for income and penalty tax free distributions of Roth IRA earnings.
Since he is at least age 59½, either Code Q or Code T will appear on Form 1099-R. Code Q means that you know that his five-year holding period has expired; Code T means that you do not know whether his five-year holding period has expired. In either case, you know that he is at least age 59½.
Your IRA owner will address taxation of a Roth IRA distribution on line 15 of his IRS Form 1040 income tax return.
(Posted: 08/28/2007)
