By Sarah Brenner, JD
Are you one of the growing number of savers who has a Roth IRA? If so, there will come a time when you will want to take funds from your account. Here are 5 things that every owner should know before taking a Roth IRA distribution.
1. Your Roth IRAs are treated as one account. Things can get a little tricky if you have more than one Roth IRA. When determining the taxation of a Roth IRA distribution, all of your Roth IRAs are aggregated. What does “aggregated” mean? Well, simply put, this means of your Roth IRAs are considered one account for tax purposes.
Your IRA custodian will report the distribution on Form 1099-R to you and to the IRS. You will be responsible for determining the taxation of your distribution. You will use Form 8606 to report the Roth IRA distribution on your federal tax return.