- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Retirement tax questions
Withdrawal of contributions from a Roth IRA is always tax-free.
However, withdrawal of amounts due to conversions, and withdrawal of earnings, may be taxable, depending on several factors.
The ordering rules means that you always withdraw withdrawals first, then conversions, then earnings.
You must keep track of your Roth IRA contributions and conversions. If audited, you have the burden of proof to show you withdrew contributions and not earnings. Turbotax wants the information to help you keep track, and to pay the tax if you end up withdrawing conversions amounts or earnings early. If you don't enter the correct amounts and let Turbotax track your Roth for you, you may not be covered by the accuracy guarantee if the IRS audits you and assesses tax and penalties for a taxable Roth withdrawal.
You can't change the codes on the 1099, but when you are asked for prior contributions, enter any number larger than the withdrawal amount. That will make the withdrawal non-taxable, but you are taking the responsibility to demonstrate that you are only withdrawing contributions.