Things You'll Need

Instructions

1

Use IRS Form 8606 (Nondeductible IRAs) to determine if the funds distributed are considered contributions under IRS rules. Contributed funds are not subject to taxes regardless of when they are withdrawn. Distributed funds will be classed as contributions as long as the total amount distributed does not exceed your lifetime contribution total.
2

Check your records to see when the Roth IRA was created. If the account is at least five calendar years old and you are at least 59 1/2 years old, earnings distributed from a Roth IRA are entirely tax-free. All withdrawals from a Roth IRA (other than contributions) made before the account is open for five years and you reach 59 1/2 are considered early distributions.
3

Consult your financial advisor and/or IRS Publication 590 (Chapter 2: Roth IRAs) to determine if an early withdrawal of earnings is allowed without penalty under one of the IRS exception rules. Qualified educational expenses such as college tuition and money used for the purchase of a first home (up to $10,000) are allowed distributions and exempt from both regular taxes and penalties. If you use Roth earnings for medical expenses that total more than 7.5 percent of your income to pay for health insurance while unemployed, or withdraw earnings after becoming disabled, there is no penalty tax, although regular taxes may apply.
4

Complete IRS Form 5329 (Additional Taxes on Qualified Plans) in addition to Form 8606 and file with your income tax return. Form 5329 is used to calculate the regular and penalty taxes (if any) you owe on early distributions of earnings from a Roth IRA.