TurboTax as part of the tax reporting process does asks about retirement contributions
Traditional
Roth
None of the Above
Next Screen it asks if the contribution was a repayment - No
Next Screen the contribution amount. In this case is was $1,084 (for contributions made in 2024).
Next Screen - Switch from Roth to Traditional - No
Next Screen - Withdraw from Roth IRA before 2024? No, no withdrawals before 2024
Next Screen - Enter Prior Year Roth IRA contributions prior to 2024 that remain in the account = 0
the withdrawal from the account was a full distribution, the account was closed.
Next Screen - Any Roth Conversions - No
Next Screen - Any Excess Roth Contributions - No
As soon as I entered the Roth contribution of $1084 (which was the last item entered, well after the 1099-R for the total distribution) TurboTax reduced the amount of tax owed by $241
On form 8880 it shows the full distribution of $3,528 reduced by the 2024 contributions of $1,084 as the "basis" to leave a taxable value $2,444.
The only conceivable explanation (that I can think of) for TT to do that is; the 2024 Roth contributions were made in the same 2024 tax year as the full distribution and it all happened before the filing date. So the 2024 Roth contributions effectively became reversed and weren't considered part of the taxable distribution, they were subtracted from the distribution.
If there is a better explanation, I'm all ears.
