Chi, age 57, and retired. He established a Roth IRA in 2015 and deposited $5,500
ID: 2514955 • Letter: C
Question
Chi, age 57, and retired. He established a Roth IRA in 2015 and deposited $5,500. In 2016 Chi contributed another $5,500. He has not contributed any funds in 2017 or 2018. The account is worth $14,000 in late 2018. In 2018, Chi withdraws $12,000 to make a down payment on a treasured sports car. What, if any, are the tax consequences and penalties of withdrawing $12,000 from his Roth IRA in 2018? He is in the 20% tax rate.
$200 ordinary income +(10% on $1,000 = 100)
Total $300
$200 ordinary income and $200 of penaltyExplanation / Answer
As Chi has made an initial contribution of $ 5500 at the age of 57 and in 2015 and has withdrawed an amount of $ 12000 in 2018 that has exceeded 59 years 6 months , chi can withdraw that amount with out any tax rates. ie.,If you are 59½ or over, you may withdraw as much as you want, as long as your Roth IRA has been open for at least 5 years.
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