Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Not applicable
posted Apr 6, 2021 11:12:31 AM

[HELP] Wrong amount calculated for Covid-19 distribution from Roth IRA

In 2020, I took a lump sum distribution from my Roth IRA, which totaled $123k and splits into two parts

1. Covid distribution: $100k

2. Contributions withdrawal: $23k

 

However, when I enter this information into turbotax it says my Covid distribution was only ~$82k. As a result, I'm getting hit with a 10% early withdrawal penalty on $18k balance.

 

My Covid distribution is supposed to be $100k, so what am I missing?

0 3 327
3 Replies
Expert Alumni
Apr 6, 2021 3:16:13 PM

If you are not eligible to take a Roth distribution, you can get hit with an Early Distribution Penalty on the balance that you indicated was not 'covid-related'.

 

Click this link for more detailed info on Early Withdrawal Penalty on Roth Distributions

 

Since you don't have to account for what you did with the distribution, you could indicate that the entire amount of the distribution was 'covid-related'.

 

You may want to delete/re-enter your 1099-R to do this.

 

 

 

 

 

 

Not applicable
Apr 6, 2021 3:32:38 PM

I'm under the impression that withdrawing Roth IRA contributions is subject to no penalty; you are only subject to penalties on earnings. 

 

If I can take 100k via Covid relief and the rest that I withdrew is purely contributions, then I would think that I would be subject to no penalties, right?

Level 15
Apr 6, 2021 4:28:06 PM

TurboTax's calculation is correct.  When your Roth IRA distributions are divided between COVID-19-related and non-COVID-19-related amounts, you are not permitted to allocate all of your contribution basis to the non-COVID-19-related portion.  Your contribution basis is instead applied proportionately to these two portions.  With $23,000 of contribution basis, roughly 82% (roughly $18,860) of the $23,000 non-COVID-19-related portion is taxable and subject to early-distribution penalty.

 

Had you taken out only $100,000 and claimed it all as COVID-19-related, you would have no penalty.  Unfortunately, it's too late to roll over any of the non-COVID-19-related portion to bring the net distribution down to $100,000.