Snow...and Roth IRA

[imjulier]

Finally getting some snow in metro denver....first sizeable snow since a year ago which is not typical. Hopefully, we'll have good snows in march as well since we didn't get any last year and that led to all the summer wildfires. Anyway, stuck inside on a Sunday so here's my question.

Are all qualified Roth distributions non-taxable? Including the earnings part? This is what I have picked up from other strings on this board and from reading the 8606 instructions.

I know the distribution is qualified but includes about 2K in earnings and I don't know if this gets reported. My understanding has always been that the earnings portion would be taxable but I obviously haven't had any clients old enough to cash out a Roth. I feel like I should have understood this correctly a long time ago but I may not have. If that is the case, I wish I was 30 again and could convert my 401K.

Thanks, I'm sure this is an easy question and I feel like a ???? for not getting it.

Julie

[Lion EA]

That's the beauty of a Roth. Qualified distributions are tax free. Good for retirement. And, good to leave to heirs who won't have to use a chunk of it to pay the taxes on their distribution. Check The Tax Book or your research materials for a chart comparing retirement plans.

[Catherine]

Also keep in mind the 5-year holding period. Tax Book has details. Pretty much if first contribution is 5 or more years ago your client should be all set.

[kcjenkins]

That is the whole point about the Roth. The contributions are not DEDUCTIBLE, but the earnings are not TAXABLE. Wonderful when you reach the end and start taking it out. Especially great for young workers who don't need the deductions because they are not making much,as long as they leave it alone until they are old. All those years of earnings are totally tax free.