Roth IRA

[ebrann]

Why is Turbotax asking me to "Enter Prior Year Roth IRA Contributions"?  I am supposed to report my net regular contributions prior to 2021.  My last contribution to my Roth IRA was in 2013.  But the way the instructions are worded, I should add up all of my prior contributions, subtract the amount I withdrew, and enter that number in the window. If I did that, I would be entering a negative amount.  Now if they mean contributions within the last 5 years,  I would subtract a large amount from zero (0).  Which does not make sense.  So the question should be, did I make any contributions in the last 5 years, if NO go on to the next screen. Since I am stuck at this screen, what should I do?

[dmertz]

Th question is being asked with regard to all years prior to 2021.  If you received Roth IRA distributions prior to 2021 totaling more than the amount of Roth IRA contributions made for years prior to 2021, your basis in Roth IRA contributions carried into 2021 is zero and all that remained in your Roth IRAs at the end of 2020 are amounts attributable to investment gains and possibly Roth conversions.  (TurboTax will ask separately about your basis in Roth conversions.)

[ebrann]

So I should enter 0.00 in that window and move on.  I don't have any Roth conversions.

[dmertz]

If you have already taken distributions prior to 2021 of all of the contributions you made prior to 2021, you have no contribution basis carried into 2021.

If you made no distributions prior to 2021, your contribution basis prior to 2021 is the total of all of the contributions made prior to 2021.

[ebrann]

I took money out in 2021. The last contribution I made was in 2013.  Since the last contribution was over 5 years ago, there should not be any calculation for taxes on any of the money I take out.

Correct?

Therefore the answer to the question is $0.00.

[FangxiaL]

If you enter $0 for all prior years' contributions, you might have taxable distributions from your Roth IRA account if you are under age 59 1/2, and no exception applies.

Ask yourself these questions:

• How much did I put my own after-tax dollars into my Roth IRA, including conversions? It could be 20 years ago or one year ago. As long as you set up your Roth account more than 5 years ago, you've met the 5-year rule. This applies to contributions only, not conversions.
• How much have I taken out of my Roth IRA account before 2021 distributions?
• The money you put into your Roth IRA will be returned to you without any tax consequences. 
• Your Roth contributions will come out first before the earnings in the Roth IRA account for income tax purposes.

@ebrann
 

[Khill74]

I converted my traditional IRA into a Roth IRA in 2010 and paid taxes at that time.  Since taxes have been already been paid, should I not include the amount of the conversion as my contribution basis, plus any contributions that have been made?  Your first point indicates it applies to contributions only, not conversions, after first saying that conversions are included.  I'm confused. 

[dmertz]

@Khill74 , in 2021 TurboTax this is entered as basis in 2016 and prior conversions.  TurboTax treats this amount the same a regular contribution basis and omits it from Form 5329 line 1 when determining the amount of an early Roth IRA distribution that is subject to penalty.  Distributions in 2021 of funds attributable to Roth conversions that were taxable and done after 2016 would be subject to the 10% early-distribution penalty.

TurboTax tracks the year and amount of taxable and nontaxable Roth conversions until they have met the 5-year holding period for conversions, at which time all of conversions that have met the 5-year holding period are lumped together in this tracking.

[Khill74]

Thank you.  Another question: Is the Roth IRA taxable in New Mexico?

[PattiF]

Yes. Depending on income level, taxpayers 65 years of age or older may be eligible for a deduction from taxable income of up to $8,000 each. 

Low-income taxpayers may also qualify for a property tax rebate even if they rent their primary residence. Beginning with tax year 2002 persons 100 years of age or more who are not dependents of other taxpayers are exempt from filing and paying New Mexico personal income tax.