Using Turbotax: how to specify Roth IRA early withdrawl on original contributions for account older than five years as to avoid penalty?

[Simone7000]

I took early distribution of my Roth IRA on funds that were contriubted over 5 years ago, in an account older than 5 years old.  The 1099-R form that Fidelity issued me has box 7 checked as "J", "early distribution from a Roth IRA, no known exception".  Turbotax doesn't give me an option to select my circumstance, thus wanting to tax the whole amount.  There were some proceeds in there which I understand are taxable.  

How can I fix this and not get taxed on the portion that shouldn't be taxed?  Thank you

[TomK2023 · Accepted solution]

Generally, as long as your Roth has been open for at least five years, you can withdraw as much as you want (if you're 59½ or older) or anything up to the amount you put in (if you're under 59½) without any taxes or penalties.

The problem is that you have not entered the basis of the Roth IRA in order to get the proper tax treatment of your distribution.

Entering Roth Ira information:

1. Open your return.
2. Search for roth ira in the search box.
3. Click on jump to roth ira link.

On the next screen, be sure that Roth IRA is checked.  Click Continue. 

Continue through the interview.  On the screen where you see Let Us Track Your Roth IRA Basis, click Yes. 

Then Enter Prior Year Roth IRA Contributions (this is asking for your total contributions for years prior to 2022 (basis)).  If your basis exceeds your distribution, then the distribution will not be taxable.  If the distribution exceeds your basis, then the excess will be taxable.

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

TurboTax Expert AnnetteB6 original post to a similar question.

[Edited 3/08/23 | 2:15pm PST]

@Simone7000 

[Opus 17]

You can withdraw your contributions at any time without tax or penalty.  The 5 year rules do not apply.  

If you are under 59-1/2 and you withdraw money from conversion less than 5 years after the conversion, you will pay a 10% penalty for early withdrawal.  And you will pay income tax and a penalty if you withdraw earnings before age 59-1/2.

The problem seems to be that Turbotax does not know what your prior contributions are.  The expert seems to have the right answer as to how to report your contributions in the program. 

[Simone7000]

When I "Search for roth ira in the search box" I just see topics come up, not "Jump to the link" in my return. 

What am I missing?  Thanks

[DanaB27]

Please try these instructions instead:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Enter all your Form 1099-R
5. On the "Your 1099-R Entries" screen click "continue"
6. Answer all the questions and make sure you enter the net contributions prior to 2022 on the "Enter Prior Year Roth IRA Contributions" screen

@Simone7000