TurboTax 2022 is figuring my Roth withdrawal incorrectly

[mkirkwag]

At least, I hope it is! I'm over 59 ½. I had two Roth IRAs in SoFi. They were losing money like mad so I pulled them out an put them into savings. They were not 5 years old; however, I should only have to pay taxes on the gain. I *lost* money, so there should be no tax, as I've already paid tax on the initial deposits.

However, TT reduced my refund by ~39%!

I must have mischaracterized something about my withdrawal? Or has TT lost it's mind?

[DanaB27]

Please make sure you enter your Roth net contributions in the follow-up questions:

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
5. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen
6. Answer the remaining question.
7. If you withdrew earnings, enter the earnings under "Another reason" since you are over 59 1/2 on the "Did you use your IRA to pay for any of these expenses?" screen (this screen only comes up if you withdrew earnings and will give you an exception from the 10% early withdrawal penalty)

[mkirkwag]

"Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen"  Done

"Next question" is "Any Roth IRA conversions?" Done

The last question is, "Do you have any excess Roth contributions?" Done

No place there to enter "another reason."

I don't see any question about earnings. After entering each 1099-R it asks me if I withdrew for any of the qualified reasons or "used it for something else," which is what I chose.

Can you tell me where to find the "another reason" on the form itself (as opposed to EasyStep), @DanaB27?  Your help is greatly appreciated. Although, since I had no earnings, it may be moot.

I did find that my contributions were too low and fixed that. Still, the taxable amount is only ~$2700 and my refund was reduced by $600.

[DanaB27]

You will have to click continue after you entered all your Form 1099-Rs and it will be after the Roth IRA questions. But if the "Did you use your IRA to pay for any of these expenses?" screen doesn’t come up then this means you didn’t have any taxable earnings and your distribution isn’t subject to the 10% early withdrawal penalty. You must have only withdrawn your contributions. Therefore, no entry is needed. 

@mkirkwag 

[dmertz]

DanaB27's replies have nothing to do with getting TurboTax to prepare Form 8606 Part III correctly to determine that taxable amount of your Roth IRA distribution.

On the page that list the Forms 1099-R that you have entered you must click the Continue button and proceed to where TurboTax asks you to enter your basis in Roth IRA contributions.  Because, as you have stated, your basis in Roth IRA contributions exceeds the amount of your distributions, the calculation on Form 8606 Part III will produce a taxable amount of $0.  Because the taxable amount is zero, the early-distribution penalty is also zero, no need to claim any penalty exceptions.

[mkirkwag]

What I guess I'm not making clear is that I've entered every "Continue" button there is. There is no option for entering the basis, unless it's the question about the amount I contributed prior to 2022. Also, Roth doesn't care about profit and loss. If you're over 59 ½ and you withdraw early, you have to pay 10% tax -- but this is a lot more.

Can you by any chance tell me what lines on the forms this translates to? I also didn't find any place on the form itself that lets me enter age as a factor.

[DanaB27]

Yes, you will enter your basis (from 2021 and prior years' Roth contributions) on the screen when TurboTax asks the question about the amount I contributed prior to 2022.

No, you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. The 10% penalty only applies if you withdraw earnings early (under 59 1/2). 

If you take a nonqualified Roth IRA distribution then it will be entered on Form 8606 (Part III) line 19. Your Roth basis is entered on line 22. If you show a taxable amount on line 25c then this will carry over to Form 5329 line 1 for early distribution. Since you are over 59 1/2 the distribution will be entered on line 2 for the exception of the 10% early penalty. Please see Form 5329 line 2 for details.