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Greetings everyone. I was wondering if anyone might be able to help? I am a first-time homebuyer under the age of 59 who would like to withdraw $10,000 from my Roth IRA account to put toward the down payment on the house that I plan to purchase. Considering these circumstances (first time homebuyer), I understand that both the 10% penalty for a premature distribution and taxes on the distribution will be waived. Is this accurate?
Also, since my Roth IRA has been active for over five years, does that mean that I won’t owe taxes on Roth IRA contributions, conversions or earnings (from the distribution) either?
Below is a step-by-step of what I assume is the process for taking the distribution. If I am wrong regarding any of these steps, please correct me, and you will notice I have asked questions (within the step-by-step) also. Any help would be greatly, greatly appreciated. Many thanks in advance - Reno
1. I withdraw $10,000 - as a premature distribution - from my Roth IRA account. This sum is subject to a 10% penalty due to early distribution.
2. Do I pay the 10% penalty at the exact time that I received the distribution? Or, at the end of the year? Also, which entity does the penalty money go to – Morgan Stanley or the government? Also, is the 10% penalty considered a tax?
3. During tax filing for the year 2014, I must complete IRS form 5329, which will notify the government of the distribution amount as well as my status as a first time homebuyer.
4. Which documents must I submit to the government to show that my Roth IRA has been active for over five years, that the funds were used within 120 days from when I first requested the money, and that I am a first-time homebuyer?
5. After I my file taxes, will the government refund the 10% penalty funds or simply not take it at all?
Also, since my Roth IRA has been active for over five years, does that mean that I won’t owe taxes on Roth IRA contributions, conversions or earnings (from the distribution) either?
Below is a step-by-step of what I assume is the process for taking the distribution. If I am wrong regarding any of these steps, please correct me, and you will notice I have asked questions (within the step-by-step) also. Any help would be greatly, greatly appreciated. Many thanks in advance - Reno
1. I withdraw $10,000 - as a premature distribution - from my Roth IRA account. This sum is subject to a 10% penalty due to early distribution.
2. Do I pay the 10% penalty at the exact time that I received the distribution? Or, at the end of the year? Also, which entity does the penalty money go to – Morgan Stanley or the government? Also, is the 10% penalty considered a tax?
3. During tax filing for the year 2014, I must complete IRS form 5329, which will notify the government of the distribution amount as well as my status as a first time homebuyer.
4. Which documents must I submit to the government to show that my Roth IRA has been active for over five years, that the funds were used within 120 days from when I first requested the money, and that I am a first-time homebuyer?
5. After I my file taxes, will the government refund the 10% penalty funds or simply not take it at all?
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