This does not work. I tried everything, indicating "0" as the taxable amount (and unchecking "Taxable Amount Not Determined") but as long as "T" was indicated as the type of distribution, the whole amount was taxed by TurboTax premier.
The fault lies with Fidelity and other financial institutions who insist on issuing the T code even though they are in many cases in possession of all the information that indicates the distribution is qualified (Q code). I can understand their wish to limit their liability by wrongly assigning a Q to a Roth IRA that should be a T but in mine, and many others' cases, Fidelity has on file that I started the Roth (with them!!!) many years ago and that I am well over 59.5. I is inexcusable that Fidelity knowingly issues a distribution code that is incorrect and throws it in the taxpayer's lap to figure out what to do.
I spoke to a helpful IRS rep about the issue. Since there is no way I have found in TurboTax Premier to untax this distribution without changing the code from T to Q, I asked if that would create a problem. She said that when/if my return is reviewed, the discrepancy with what I submitted vs what Fidelity submitted could raise a flag. Her advice was to manually change the code to Q and to have complete notes about the incorrect code from Fidelity, records of when the Roth was established, and also note my conversation with her including her agent number so that I could defend my changing the code to Q. She said that should suffice.
I wonder how many people submit their returns through TurboTax or other software and don't notice that their Roth was taxed? Seems like a class-action lawsuit waiting to happen and I would love to sign on to it if it does.
