Question

Roth Distributions- 2020 Taxes

Forum|Forum|5 years ago
January 23, 2021
1 reply
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Having trouble with entering data for a Roth distribution in turbo-tax. To me, it feels like something is missing.

I'm 62. In 2016 I opened a Roth IRA and rolled over 401k contributions from a former employer into the IRA totaling roughly $10k. Also in 2016, withdrew $9k from that Roth IRA. In 2017, no contributions, but took a $1200 distribution. No other additions or distributions until 2020. In 2020, I rolled over $4500 from a previous employer into the IRA and made a $950 contribution. At the end of 2020, I took a distribution of $5300. That Roth IRA is still open today with a minimal balance. I received a 1099-R showing the distribution with a T distribution code.

Following the turbo tax instructions, I netted the 2016 to 2019 roll-overs and came up with a -$200 balance (meaning some of the withdrawals were previously untaxed income generated by Roth investments).

When I enter the $-200 in Turbo-Tax for 2016-2019 and show the 2020 distribution, I get a roughly $500 tax hit. No where does Turbo Tax automatically tax into account the 2020 roll-over or additional contribution. If I override the 2020 Roth contributions on Lines 33 and 34 of the Turbo Tax spreadsheet and add in the contributions, then the tax impact is back is negated.

No where in the automated step by step does turbo-tax ask for or include 2020 contributions.

Question: I've come to trust Turbo Tax and do not override inputs. If I follow the step by step, I have a $500 tax hit. If I override the step-by-step, there is no tax hit. Am I right to override the step by step and manually add the 2020 roll-over and contribution on the worksheet? Or am I missing something? The point here is that the Roth IRA had virtually no balance when 2016 to 2019 transactions are netted. In 2020, I added a roll-over and cash contribution, but took almost all of that in distribution at the end of 2020. All contributions were after tax contributions and investment income was nothing close to anything that would generate a tax larger tax hit.

Thoughts?

DaveF1006

it depends on how you entered the information in Turbo Tax. You can override the forms in Turbo Tax but if any of the overridden entries are in red, you won't be able to electronically file but you can print and mail your tax return in. You might also reach out to Turbo Tax support and have an agent review your entries on the phone to make sure everything is recorded correctly. To reach tech support, please call 1-800-446-8848.

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