If I withdrew only my contributions from my roth IRA, why are some of it saying it's retirement income when I added my 1099-R info? None of what I withdrew were earnings.

[silverdj]

@DaveF1006 , no for 2023. I withdrew contirbutions from my Roth IRA in 2023 and i am filing in 2023. All principal was invested 2010-2021

[DaveF1006]

To clarify, can you repeat the steps I gave to get another token? I can't open a 2023 tax return with a six-digit token#. It should be seven.

[silverdj]

Apologies for the delay @DaveF1006  as I am truly grateful for your time and assistance.

Try 1191858 as I just did it again.  This should be for tax year 2023.

I also spoke with Vanguard and they believe it should be a "J" for the code as it is on the 1099-R and that TurboTax should treat it similar to how it treats the code on the Fed return (not taxable) and told me to let TurboTax know there may be a bug.

Thanks again!

[DaveF1006]

Yes, unfortunately your Roth Distribution is not a qualified distribution unless it meets one these four criteria. i suspect you fall within the first bullet point. Even you you meet the holding period requirement, the income is disqualified because you haven't reached age 59 1/2 and your 1099R is coded J.

• Made on or after the date the individual reaches age 59½; or
• Made to a beneficiary (or the individual's estate) after the individual's death; or
• Made because the individual became disabled; or
• Made as a qualified first-time homebuyer distribution as defined by the Internal Revenue Code.

Please read the following link in the NJ website that briefly explains how non-qualified distributions are treated.

Roth IRA's Treatment in NJ 

@silverdj 
 

[silverdj]

Thank you @DaveF1006 however NJ states it would treat it as the Fed would. The Fed is not taxing it since the money withddrawn was initial, already taxed principal. One of the benefits of a Roth IRA is you can with draw your prinicipal tax and penalty free.  The NJ website states it treats it as the Fed does and that should be non taxable income. So I believe there's a flaw with Turbo Tax as NJ should not be taxing it just as the Fed is not taxing it. Worst case, I will file with an accountant manually and stop using TurboTax (unfortunately).

[DaveF1006]

It depends. If you read the opening paragraph in the NJ link I sent, it says The New Jersey Income Tax treatment of Roth IRAs conforms to the federal treatment. Direct contributions to Roth IRAs are not deductible and qualified distributions from Roth IRAs are not includable in New Jersey income. This means that both these conditions need to be met to exclude this from NJ income to conform with the federal treatment. This is how this is interpreted.

Since this distribution is non-qualified, then it is taxable under the NJ tax code. I don't mean to argue this point with you but I must follow the language that is written in the code. 

@silverdj 

[silverdj]

Thanks @DaveF1006 so let me reply to everything you stated (my comments below in italics):

It depends. If you read the opening paragraph in the NJ link I sent, it says The New Jersey Income Tax treatment of Roth IRAs conforms to the federal treatment.  = Correct. So if TurboTax isn't taxing and isn't penalizing my withdrawal of initial investment on the Federal Return, NJ should not be either.

 Direct contributions to Roth IRAs are not deductible and qualified distributions from Roth IRAs are not includable in New Jersey income. This means that both these conditions need to be met to exclude this from NJ income to conform with the federal treatment. This is how this is interpreted. = Correct. My point is it is qualified since, again, I'm not withdrawing earnings but rather my prinicipal initially invested, which is one of the pro's to having a Roth IRA. You can always take out your prinicipal tax and penalty free. Just not your earnings etc (before 59.5).  From Forbes.com for reference: "Once you contribute money to a Roth IRA, you can withdraw your original contributions at any time without paying any sort of tax or penalty. This means there’s almost no reason not to squirrel away money in a Roth."

Since this distribution is non-qualified, then it is taxable under the NJ tax code. I don't mean to argue this point with you but I must follow the language that is written in the code.  = No worries. we just don't see eye to eye. I called an accountant and he agrees with me. He believes TurboTax should not tax nor penalize it for NJ if it's not for the Fed tax return. 

Worst case, I sadly have to stop using TurboTax, which would be upsetting because I've been using TT for a long time and love it.

[rjbartlett91]

I also have this issue, but I am not getting the questions about whether the account was open for 5 years and about prior year contributions.

[DanaB27]

Please follow these steps to get the follow up questions in the federal interview about a Roth IRA distribution:

1. Login to your TurboTax Account 
2. Click on "Search" on the top and type “1099-R” 
3. Click on “Jump to 1099-R” and enter all your 1099-Rs
4. Click "Continue" on the "Review your 1099-R info" screen after you entered all you Form 1099-R
5. Continue until you get the "Owned Any Roth IRA for Five Years?" screen. Answer and continue.
6. Continue through the questions and make sure you enter the net contributions prior to 2023 on the "Enter Prior Year Roth IRA Contributions" screen.

If you do not get these follow-up questions then please let us know what is your code in box 7?

@rjbartlett91 

[silverdj]

Thank you @rjbartlett91  for trying to assist.

I answer all those questions and it doesn't matter what I enter for Prior Year Roth IRA Contributions. Whether i put 0, whether I put the exact principal I withdrew, or whether I put more than the exacct principal.  Also, I'm wondering if TurboTax is getting confused somewhere because it next asks me a question about my IRA to Roth IRA conversion that i did some years ago and imports a $ amount from my 2022 return (which I can't find on my 2022 return physically and oddly).  So i wonder if these items are somehow making NJ state taxing me on my principal even though it should not be (similar to how the Fed acts)

Thanks

[DanaB27]

For your NJ state return please review the entry for the contribution amount previously taxed during the NJ state return interview:

1.  On the “You've Finished Your New Jersey Return” click “Update” next to “Adjustments”
2. Continue until you get “IRA Information” screen:

• If this is the first year of withdrawal then select “Yes, this was the first year of withdrawal from this IRA” enter your contribution next to “Total of IRA contribution previously taxed”
• If you withdrew funds before 2023 then select "No, I've made withdrawals from this account before" and click “Continue” and enter the information on the “IRA Withdrawal” screen 

@silverdj