@gxt1 wrote:
Withdrawal of earnings is subject to income tax plus a 10% penalty for early withdrawal if the taxpayer is under age 59-1/2.
Apparently not if the contributions are withdrawn in the same tax year as when they were made, otherwise why would TT calculate a refund after the contributions for the same tax year were entered?
I don't know what you are talking about.
Your Roth IRA contributions are normally not reported anywhere on your tax return, unless they were in excess (you were ineligible to contribute). Turbotax will ask about your Roth contributions for a couple of reasons but that information is not sent to the IRS.
When you withdraw from a Roth IRA, if you just make a regular withdrawal with no special procedures, you will get a 1099-R that should have code "J" in box 7. This indicates an early distribution with no known exception. After entering the 1099-R, you should continue in the interview (don't skip questions). You should be asked for the amounts of all prior contributions, and any conversions. The result goes on box 4a and 4b of form 1040. For example, if you report a withdrawal of $3500 and prior contributions of $3000, your form 1040 should have $3500 in box 4a (total withdrawals) and $500 in box 4b (taxable withdrawals). If it is an early distribution, the amount in box 4b should also be found on form 5329, line 1.
As far as a tax refund, that is a simple math problem between the amount of tax owed and the amount collected in withholding and payments, and is considered over the entire tax return. Any withholding on a withdrawal is only an estimate of what might be owed. Again, suppose the withdrawal is $3500 and there is 10% withholding or $350. Only the $500 of earnings is taxable, at 22% the tax plus penalty is $160, so the remaining $190 will come back as a refund.
