I opened a Roth IRA for $4,000 in 2006 and my wife opened one in 2006 for $4,000 with after tax money. No more money was put in over the years, and no withdrawls were done for these until 2018. I opened another Roth IRA in 2010 in the amount of $301.62. I then converted $10,000 from a traditional IRA in the same year into this Roth IRA. In 2011, I rolled over $5,000 to a Roth annuity I opened from the 2010 Roth IRA. Over the years until 9/2012, I deposited a total of $400 into my 2010 Roth IRA. Also in 2012, I converted another $5,000 from a traditional IRA to the 2010 Roth IRA. In 2013, I converted another $5,000 from a traditional IRA to the 2010 Roth IRA. In the same year, I rolled over $1,000 from the 2010 Roth IRA to the Roth Annuity. In 2014, I converted $5,644 from a traditional IRA to the 2010 Roth IRA. No more deposits, conversions, or rollovers were done over the years and no withdrawls were done until 2018.
In 2018, I withdrew $4,000 from the 2006 Roth IRA and my wife withdrew $4,000 from her 2006 Roth IRA. I also withdrew $5,000 from the Roth Annuity and $10,000 from the 2010 Roth IRA. This was all used to fund a new U/L policy. No other withdrawls were made.
Turbotax took me through a series of questions and I got it to the point that it sees this money isn't taxable for ordinary taxes, but it's telling me I have to pay a 10% penalty since I am not yet 59 1/2. Am I really subject to this penalty? If not, how do I get Turbotax to recognize that? I called the IRS and after a series of questions they asked me, they said it's not taxable.
The distribution is not a qualified distribution. For TurboTax to be able to determine that these 2018 distributions are nontaxable distributions attributable to Roth IRA contribution basis and Roth conversion basis over 5 year old, you must click the Continue button on the Your 1099-R Entries page, enter your and your wife's contribution basis for years prior to 2018, indicate that did Roth conversions, enter $20,000 for your Roth conversion for years 2013 and before and $5,644 for your 2014 Roth conversion basis. TurboTax will prepare one Form 8606 for you and another for your wife to calculate that the taxable amount of these distributions is $0.