Retirement tax questions

Do not make any changes to your Form 1099-R.  It should be entered into your return just as you received it.

Adding the basis for your Roth IRA into your tax return should take care of the issue of TurboTax taxing the distribution.

The basis of an IRA is the amount that was originally contributed.  This does not include earnings that have accumulated in the account over time.  You can take a distribution of your contributions to a Roth IRA without any penalty or income tax.  Therefore, TurboTax needs to know how much of your distribution was contributions to the account.  You should enter the whole basis for the Roth account instead of just enough to cover the distribution that you received.  The amount you enter for the basis will be reported on Form 8606 and a TurboTax worksheet that can help you keep track for the future.

After you enter your Form 1099-R, there should be some follow-up questions to go through.  One of those questions will ask about Prior Year Roth IRA Contributions.  This is where you should enter the amount that had been contributed to the account.  

If you do not see those follow-up questions, keep reading below for another method to enter your Roth IRA basis:

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner) 
• This opens a box where you can type in “Roth IRA” (be sure to enter exactly as shown here) and click the  magnifying glass (or for CD/downloaded TurboTax, click Find)
• The search results will give you an option to “Jump to Roth IRA”
• Click on the blue “Jump to Roth IRA” link 

This will bring you to a screen with checkboxes to indicate what types of accounts you had in 2023.  Be sure that Roth IRA is checked.  Click Continue. 

If Traditional IRA is checked or if you have a spouse that had either type of account, the next questions will not pertain to your Roth IRA.  Continue through this section until you are asked whether you made any contributions to your Roth IRA for 2023.  This is the beginning of the section where you will enter details about your Roth IRA, including the basis.

Continue answering the questions according to your situation.  On the screen where you see Let Us Track Your Roth IRA Basis, click Yes. 

Then, on the screen titled Enter Prior Year Roth IRA Contributions, this is asking for your total contributions for years prior to 2023 (basis).  If your basis exceeds your distribution, then the distribution will not be taxable.  If the distribution exceeds your basis, then the excess will be taxable.