My Roth IRA distributions equalled $7,017. Of that amount, $4,700 of it was my principal, not my income. Only $2,317 of the money was income. Why am I being taxed on all?

In order not to be taxed on your contributions, go through the interview carefully. 

To be sure that the distributions are treated properly, you need to enter the basis for the Roth accounts.  There are a couple of ways to accomplish entering the basis.

As you enter the 1099-R into your tax return there will be follow-up questions that you will answer to determine how much of the distribution will be taxable, if any.  One of the questions will ask about the contributions that were made to the Roth account, which is the basis of the account.  The basis is then used to calculate the taxable portion of your distribution. 

The key is to be sure to Continue through all the follow-up questions until you are back at the main income screen.  If you are entering more than one Form 1099-R, you may not see the question regarding the basis until you Continue forward from the summary page showing all the 1099-R entries.

You can always withdraw contributions (but not earnings) that you made to your Roth IRA tax and penalty free at anytime. Additionally, the Ordering rules for withdrawals from a Roth IRA are: first from regular contributions, then from Conversion and rollover contributions, on a first-in, first-out basis and finally from Earnings on contributions.

Please note: A qualified distribution from a Roth IRA is tax-free and penalty-free, provided that the five-year aging requirement has been satisfied and one of the following conditions is met:

• Over age 59½
• Death or disability
• Qualified first-time home purchase

A non-qualified distribution is subject to taxation of earnings and a 10% additional tax unless an exception applies. For Roth IRAs, you can always remove post-tax penalty contributions (also known as "basis") from your Roth IRA without penalty.

When you are entering this information into TurboTax, your Form 1099-R, box 7 codes J, Q and T identifies a Roth IRA distribution and determines the tax treatment. If you have a J or a T, the distribution is considered taxable unless there is an exception. TurboTax will guide you on all the exceptions.

Please refer to this IRS link for more information about Roth IRAs: LINK