Why is my $1,500 Roth IRA withdrawal taxed? It was from 2024 contributions (no gains). TurboTax won’t let me specify 2024 contributions. How to fix?

Forum|Forum|1 year ago
January 24, 2025
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From my understanding, contributions to a Roth IRA can always be withdrawn tax-free and penalty-free, regardless of the 5-year rule, since they’re made with after-tax dollars. However, TurboTax is calculating $150 as a tax liability for this withdrawal. Here’s what I’ve done so far: I entered my 1099-R correctly. Box 7 shows a "J" code. I entered my Roth IRA contribution history, but TurboTax only asked for contributions before 2024, and I cannot specify my 2024 contribution. I selected "I did something else" when asked about rolling over the funds since this was a withdrawal, not a rollover.

AnnetteB6

Your understanding of the non-taxable nature of taking a distribution from your Roth IRA contributions is correct.

Once you have entered your 2024 Roth IRA contribution, then your distribution from the Roth IRA should be non-taxable as long as it does not exceed your contribution.

The steps needed to enter the 2024 Roth IRA contribution can be found in the following TurboTax help article:

Where do I enter my traditional or Roth IRA contributions?

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WD Fretz

The distribution from my Roth should not be taxable despite not meeting the 5 year period; cash was used to fund the Roth and cash was distributed so there was no additional gain. My 1099-R is coded at T. How do I input the distribution to ensure that only the conversion to Roth is taxed, not the distribution from it?

DanaB27

If you did not meet the 5 year period then please make sure you enter your net contributions prior to 2024 and the conversions prior to 2024 in the Roth follow-up questions:

Login to your TurboTax Account
Click on "Search" on the top and type “1099-R”
Click on “Jump to 1099-R” and enter all your 1099-Rs
Click "Continue" on the "Review your 1099-R info" screen after you entered all you Form 1099-R
Answer "Owned Any Roth IRA for Five Years?" screen
Continue through the questions and make sure you enter the net contributions prior to 2024 on the "Enter Prior Year Roth IRA Contributions" screen
On the "Any Roth IRA Conversions?" screen answer "Yes" if you made conversions before 2024
Continue through the questions.