# Roth IRA - tax on early distributions



## Mannisenmaki (Feb 2, 2013)

Hello

I am helping my wife prepare her US federal income tax return and we have a couple of questions regarding the taxes payable on an early distribution from a Roth IRA.

My wife is a US citizen and I am a non-resident alien. We both live in the UK.

My wife has some Roth IRAs and, for various reasons, has requested that they be distributed early. Our questions are as follows:

1. Additional Tax on Early Distributions
Publication 590 refers to an additional tax of 10% being payable on a distribution that is not a qualified distribution. The only way we could make up to $10,000 of the distribution qualified is through the exemption for the purchase of a first home.

My wife does not qualify as a "first-time homebuyer" but our question is whether I do. The exemption can be used to pay qualified acquisition costs for the main home of a first-time homebuyer who is the taxpayer's spouse so it would appear that I do qualify. Can we still use the exemption even though I am a non-resident alien and the home is in the United Kingdom? I haven't seen anything to indicate not.

2. Standard Tax on Early Distributions
Publication 590 states that "you do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRAs. You may have to include part of other distributions in your income."

As indicated above, we need to use the first home exemption to make the distribution qualified. If that exemption does not work, or if there are excess distributions after excluding the $10,000 for a first home, can someone explain how the ordering rules for distributions work? I don't understand them at all but they appear to cater for situations much more complicated than ours (we don't have any conversions or rollover contributions, but the recapture amount looks as if it might be relevant, but simply doesn't make sense!).

Thank you very much. Please let me know if more information is needed to provide an answer.

Best wishes

Nicholas


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