How do I properly report withdrawal of Roth IRA contributions? I understood contributions could be withdrawn anytime tax- and penalty- free.

[tccutler]

Over 10 years ago, my wife and I opened separate Roth IRA accounts.   We have decided to shift to other investments and chose to withdraw only the Roth IRA contributions.   Some of the earned amounts were also withdrawn due to education expenses.

Before withdrawing the contribution amounts, I consulted with various contacts to confirm withdrawal of contributions are tax- and penalty- free.   How and where do I report within TurboTax 2017 to avoid penalty?

[AnnetteB · Accepted solution]

To be sure that the distributions are treated properly, you need to enter the basis for the Roth accounts.  There are a couple of ways to accomplish entering the basis. 

As you enter the 1099-R into your tax return there will be follow-up questions that you will answer to determine how much of the distribution will be taxable, if any.  One of the questions will ask about the contributions that were made to the Roth account, which is the basis of the account.  The basis is then used to calculate the taxable portion of your distribution. 

The key is to be sure to Continue through all the follow-up questions until you are back at the main income screen.  If you are entering more than one Form 1099-R, you may not see the question regarding the basis until you Continue forward from the summary page showing all the 1099-R entries. 

If you did not see the questions about the Roth basis as you entered the Form 1099-R, an additional way to enter the basis of your Roth IRA is this.

• 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 2017.  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 2017.  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 2017 (basis).  If your basis exceeds your distribution, then the distribution will not be taxable. 

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