We took an early distribution of ROTH contributions only (not interest) to pay for college tuition but can't find how to make turbotax make it non taxable.

[jlevorse]

I read in the tax code that it is non taxable if used for college tuition.
Thanks!

[MichaelMc · Accepted solution]

For Roth IRAs, you can always withdraw post-tax contributions (also known as "basis") from your Roth IRA without penalty.

When you get to the screen that titled "Enter Prior Year Roth IRA contributions", make sure you are entering the total amount of all your previous Roth contributions. (see screenshot) So if you contributed $20,000 to your Roth IRA in prior years, you will put $20,000 in the amount box on this screen.

You can always withdraw contributions (but not earnings) that you made to your Roth IRA tax and penalty free at anytime. Additionally, the ordering rules for withdrawals from a Roth IRA are: first from regular contributions, then from conversion and rollover contributions, on a first-in, first-out basis and finally from earnings on contributions.

When you are entering your Form 1099-R information into TurboTax, Box 7 codes J, Q and T identify a Roth IRA distribution and determine the tax treatment. If you have a J or a Q, the distribution is considered taxable unless there is an exception. TurboTax will guide you on all the exceptions.

Please refer to this IRS link for more information about Roth IRAs:

https://www.irs.gov/publications/p590b/ch02.html#en_US_2015_publink1000231071

To enter your 1099- R in TurboTax Online or Desktop (you may need to upgrade to report these distributions), please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages and Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on "jump to full list" or “I’ll choose what I work on” 
4. Scroll down the screen until to come to the section “Retirement Plans and Social Security”
5. Choose "show more", then IRA, 401(k),Pension Plans (1099-R) and follow the onscreen instructions

Please note that all distributions will be reported on your tax return (whether or not they are taxable) on Form 1040 on line 15(a) (or 16(a) but only the taxable portion will show on your return as taxable on line 15(b) (or 16(b)).

[jlevorse]

The 1099-R has a J in the box only because we had moved it many years ago from another account and so the current one does not know how much we had contributed. It seems that turbotax will not let it then be non-taxed even though it was only contributions and the state form says if there it is a J they will tax it no matter what.

[dmertz]

To reach the page where TurboTax allows you to enter or confirm your net contributions made for years prior to 2016, be sure to click the Continue button on the Your 1099-R Entries page.

[larsk]

Thank you so much!! The software is really confusing at this stage because it asks for prior contributions, but the heading & example on the page says to calculate the amount remaining. If I've understood this correctly, what I should be doing is just entering the contributions, not subtracting out the distributions -- and the software is going to then calculate that amount remaining in the background. The inputs on that page could really use a review.