Taking early Roth Ira AND traditional IRA for first time home purchase

[mickey]

A husband and wife took distribution of 21600 from their Roth Ira AND 5500 from their traditional IRA to purchase their first home.  The rule says you can withdraw 10000 for this purpose without having to pay the penalty.  

Question for the community, does the 5500 not qualified since the sum of the Roths exceed the allowed 20000 (10K for each person) as qualified withdrawal?  Do they have to pay the penalty on the 5500?  What is the numbering rule for doing this?

On the 1099-R worksheet for the Roth distribution it does ask how much of the withdrawal went into buying a home.  Same with the 1099-R for the traditional withdrawal.  

How would I allocate these withdrawals to minimize the taxes for my clients?

Thank you

[sjrcpa · Accepted solution]

Since only the earnings on the Roth are taxable, I'd allocate the 10K to the taxable IRA.