Roth IRA contribution withdrawl taxable

Forum|Forum|6 years ago
February 9, 2020
2 replies
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In 2019 I rolled over my post tax contribution (minus gains) from 401K to a newly opened ROTH IRA account. Then I went ahead and withdrew a portion of that contribution amount from the ROTH IRA to bring down my mortgage balance before going for a refinance. My understanding is that you can always withdraw your contributions with no tax or penalty.

I have received Form 1099-R where box 7 has the distribution code J. After importing this form, TurboTax then shows that I have tax implications. I shouldn’t be paying any taxes or penalty if I am withdrawing only my contribution portion. In my case there hasn’t been any contribution to this new ROTH IRA for years prior to 2019.

Do I need to fill any additional form or anything I am missing to show that the amount withdrawn is only from contribution ?

Best answer by macuser_22

Yes, that’s what exactly I had done. I had rolled only the post-tax contribution to ROTH IRA and the associated gains to traditional IRA. I can see in my 401(K) account two payment statements for these rollovers with the following Tax detail info.

Tax Form: 1099R
IRS Code: G
Reason Code: Roth Conversion (only in case of rollover made to Roth IRA)

How would I split this code G (Form 1099-R) into two? Will I be receiving just a single 1099-R showing the split or it will be two separate 1099-R showing the rollover made to ROTH IRA and traditional IRA?

Thanks for guiding me so far.

Assuming that your 1099-R for the split 401(k) rollover has the after-tax contributions in box 5:

TurboTax does not directly support a single 1099-R going to two different destinations.

What you must do is split the 1099-R into two 1099-Rs.

For the amount rolled to the Traditional IRA.

1) In box 1 use the original 1099-R box 1 minus the box 5 amount.

2) Box 2a = 0.

3) Box 5 = blank.

4) Box 7 = G.

5) Answer NO to the two interview questions that ask about a Roth - the default is a Traditional IRA.

For the amount rolled to the Roth IRA.

1) In box 1 enter the original box 5 amount.

2) Box 2a - 0.

3) Box 5 = original box 5 amount.

4) Box 7 = G.

5) Answer NO to the first interview question about a 401(k) Roth and YES to the rollover to a Roth IRA.

That should properly report the 1099-R. The box totals of the two 1099-R should equal the amounts on the original 1099-R.

Nothing about splitting into two 1099-R's go on a tax return - the IRS only gets the dollar amounts on the 1040 form.

dmertz

Level 15

Did you enter the Form 1099-R that reported the rollover from the 401(k) to the Roth IRA? You must do so. After entering the code G or code 1 Form 1099-R for the distribution from the traditional 401(k) and indicating that it was converted to a Roth IRA, TurboTax will include this amount in your basis in nontaxable Roth conversions to be subtracted on your Form 8606 Part Part III according to the ordering rules for Roth IRA distributions.

You can see that your basis in nontaxable Roth conversions is properly recorded in TurboTax by examining line 36 the IRA Information Worksheet.

ash11Author

Level 3

Thanks, @dmertz for letting me know that I need to also include 1099-R for the rollover from 401(K). I need to check with Fidelity why they haven’t provided me that tax form yet. So, based on your response once I have entered 1099-R details for 401(K), TurboTax will guide me to fill Form 8606 and subtract the withdrawn amount (as nontaxable Roth conversion) to be exempted from taxation/penalty.

If I may ask where exactly are you referring to look at line 36 in the IRA information worksheet? I downloaded Form 8606 and I can see Part III what you pointed out but don’t see any line 36.

Appreciate your help.

dmertz

Level 15

Note that you can't distribute just the after-tax basis from the 401(k) account, the distribution must be a proportionate mix of after-tax basis, and pre-tax money, so if the after-tax basis was directly rolled to the Roth IRA while the pre-tax money was directly rolled to a traditional IRA, the code G Form 1099-R will generally report the sum of the two. To be able to report this split rollover in TurboTax you'll need to split this code G Form 1099-R into two, one for the portion rolled over to the Roth IRA and the other for the portion rolled over to the traditional IRA.

JE52

Level 2

Are principle withdrawl from roth taxable

AnnetteB6

Level 15

No, if you receive a distribution from a Roth IRA that does not exceed the basis of the IRA (your contributions), then the distribution is not taxable.

However, you must enter the basis of the Roth IRA into TurboTax in order for the distribution to be treated correctly.

Use the information below to do so:

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 2019. 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 2019. 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 2019 (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.

@JE52

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