In general, you do not include in your gross income qualified distributions from your Roth IRA. You may have to include other distributions from Roth in your income.

A qualified distribution is generally, any payment or distribution made after a 5-taxable-year period and which is made on or after the owner reaches age 59½. A qualified distribution may be made because the owner is disabled, or made to a beneficiary (or to the estate of the owner after the owner's death), or because it is a qualified distribution for first-time homebuyers. A distribution for a first-time homebuyer is a qualified distribution used to buy, build or rebuild the main home of a first time home buyer who is either the person for whom the Roth IRA was set up, the spouse of that person, or the child, grandchild, parent, or other ancestor of that person or their spouse. When added to all your prior qualified first-time homebuyer distributions, if any, the total distributions cannot be more than $10,000.

Part of any distribution that is not qualified may be taxable as ordinary income and subject to the additional 10% tax on early distributions.

Distributions of conversion contributions within a 5-year period following a conversion may be subject to an early distribution tax, even if the contributions have been included in income in an earlier year. See Topic 558, Early Distributions from IRA's, for more

information. If you converted a traditional IRA to a Roth IRA in 1998, and spread the income inclusion over 4 years, a distribution of the 1998 conversion contribution during this 4-year period will accelerate your income inclusion.

If you converted your traditional IRA to a Roth IRA, but were not eligible to do so, your conversion will be treated as a taxable distribution from your traditional IRA and may be subject to additional tax on early withdrawals unless the converted amount is recharacterized.

You may decide to recharacterize your Roth IRA conversion by converting back to a traditional IRA (including all net earnings from the date of conversion). You may do this prior to the due date, including extensions for filing your tax return. Show the conversion and re-characterization on Form 8606. If you have filed your tax return, you have until October 15th to recharacterize. You must file an amended return using Form 1040X with Form 8606 attached.

See Topic 309 for information about Roth IRA contributions. For more information about all types of IRAs, refer to Publication 590, Individual Retirement Arrangements, Publication 17, Your Federal Income Tax, Chapter 18, and Tax Information For You, IRA Tax Benefits 1999 Publications and forms may be downloaded from this site, or ordered by calling 1-800-829-3676.

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