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shenhao95
New Member

Roth IRA Early withdrawal

I opened a Roth IRA account of $5,500 early 2017, but had it closed later and withdrew $5,497 (-$3 fee).  

When I put the received “1099-R” into the TurboTax, it was shown that the $5,497 (with no earning) is taxable for both Federal and State tax returns.     

Why is my original post-tax contribution of $5,946 (with no earnings) taxable?  Can I avoid the tax on it?      

Many thanks for any advice and help.


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1 Best answer

Accepted Solutions
KarenJ
Intuit Alumni

Roth IRA Early withdrawal

Your Roth should not be taxable to you. Please see the following answer from  SuperUser macuser_22 to a question that was similar (someone made a Roth contribution and then withdrew it the next day).

"Unfortunately, since you failed to specifically tell the IRA custodian that this was a return of contributions and not a regular distribution they assumed a regular distribution and coded the 1099-R that way.

It is very doubtful that they will change anything that happened in 2017.

As with a return of contribution, this will not be taxable to you but it requires extra reporting on your part and since it is a code J distribution the 8606 form will be needed so that you will not pay any tax.

First, enter the 2017 Roth contribution in the contribution section so that you get credit for it and will not be taxed when you enter the 1099-R. It needs to be tracked as in #3 below.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

A Roth IRA contribution does not actually go on a tax return, but you should enter it anyway to:

1) Tell you if your income qualifies you for a contribution and warn you if it does not.
2) Check if your income exceeds the limit to contribute to a Roth.
3) Track your contribution year-to-year if you use TurboTax every year.
4) Add the Retirement Savers Credit if you qualify.


You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the follow-up questions will ask for your prior year contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to an early withdrawal penalty. That will add an 8606 form to your tax return with the Roth contribution and tax calculation in part III.

The 2017 contribution should offset the 2017 distribution to cancel any tax or penalty."

View solution in original post

2 Replies
KarenJ
Intuit Alumni

Roth IRA Early withdrawal

Your Roth should not be taxable to you. Please see the following answer from  SuperUser macuser_22 to a question that was similar (someone made a Roth contribution and then withdrew it the next day).

"Unfortunately, since you failed to specifically tell the IRA custodian that this was a return of contributions and not a regular distribution they assumed a regular distribution and coded the 1099-R that way.

It is very doubtful that they will change anything that happened in 2017.

As with a return of contribution, this will not be taxable to you but it requires extra reporting on your part and since it is a code J distribution the 8606 form will be needed so that you will not pay any tax.

First, enter the 2017 Roth contribution in the contribution section so that you get credit for it and will not be taxed when you enter the 1099-R. It needs to be tracked as in #3 below.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

A Roth IRA contribution does not actually go on a tax return, but you should enter it anyway to:

1) Tell you if your income qualifies you for a contribution and warn you if it does not.
2) Check if your income exceeds the limit to contribute to a Roth.
3) Track your contribution year-to-year if you use TurboTax every year.
4) Add the Retirement Savers Credit if you qualify.


You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the follow-up questions will ask for your prior year contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to an early withdrawal penalty. That will add an 8606 form to your tax return with the Roth contribution and tax calculation in part III.

The 2017 contribution should offset the 2017 distribution to cancel any tax or penalty."

shenhao95
New Member

Roth IRA Early withdrawal

Hi TurboTaxKarenJ,
Thank you very much for the answer.
Can I just simply not report this 1099-R in my Tax Return as it was a wrong one?
Thanks,
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