Up to $10,000 of educational expenses from a 2018 IRA distribution used to pay the expense in 2018 can be penalty free. Only any earnings more than you own prior contributions are subject to penalty. The interview will ask is the 2nd part of the interview after the 1099-R summary screen will ask if you have exceptions to the penalty. Educational expenses is one of the exceptions. Only enter the amount of earnings distributed and not the amount of contributions in the exception box. Your contributions are distributed before the earnings.
For example if you have $9,000 of prior contributions you could take out $19,000 penalty free ($9,000 contributions and $10,000 earnings) assuming you had that much earnings. If less than $10,00 of earnings then the remainder of the lifetime $10,000 can be used in the future.
You can always withdraw your own Roth contributions tax and penalty free.
Enter a 1099-R here:
Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).
OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.
Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.
[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]
One of the followup questions will ask for your prior year** contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.
Note: **Prior year - any 2018 Roth contributions should be entered into the IRA contributions section. They will not show up in the prior years contributions but will be accounted for on the 8606 form that calculates the taxable amount.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
