I funded my roth-ira in 04 with $1K. In 2020 I withdrew $1K, with the understanding that I can withdraw up to my contribution amount tax-free. Why did tax due increase?

[m122]

in 2016, I rolled over my roth ira from one bank to another, so its possible that my new bank (fidelity) does not have access to what my contributions vs earnings were to that point. How do I correct this in turbotax to prevent this from being taxable?

[AnnetteB6 · Accepted solution]

You are correct in that you can take a distribution of your Roth IRA contribution without incurring tax or a penalty.  To be sure that this is handled correctly on your tax return you need to be sure that you have entered the basis (your contributions) of your Roth IRA into TurboTax.  

To enter the basis (your contributions) of your Roth IRA, use the steps and information below:

• 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 check boxes to indicate what types of account you had in 2020.  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 2020.  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 2020 (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.

Finish the rest of the follow-up questions about your Roth IRA.