Where do I note that my Roth IRA early withdrawal was a return of regular contributions? A penalty is included as it was less than 5 years and the 59 1/2 age not met.

[Debi2025]

(7) $250 contributions were made in 2024 and one $250 contribution in 2025 for a total of $2k. After fees, $1836.84 was withdrawn on 2/20/25. Since it is less than the regular contributions, my understanding is there is no penalty or additional tax due even if the funds weren't there for 5+ years and the age threshhold is not met but it keeps coming up I owe a penalty. How do I correct that?

[AnnetteB6 · Accepted solution]

You are correct.  If your Roth distribution is less than your total contributions to the account, then there would be no taxes or penalty.  

The piece that is missing in order to determine whether the distribution should be taxable is the basis in the Roth IRA.  If you do not see a question about the basis in the Roth IRA as you enter the Form 1099-R for the distribution, then use the instructions below to be sure to enter that information into your tax return.

1. Go to Deductions and Credits > Retirement and Investments > Traditional and Roth IRA Contributions.  
2. This will bring you to a screen with checkboxes to indicate what types of accounts you had in 2025.  Be sure that Roth IRA is checked.  Click Continue. 
3. 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 2025.  This is the beginning of the section where you will enter details about your Roth IRA, including the basis.
4. Continue answering the questions according to your situation.  On the screen where you see Let Us Track Your Roth IRA Basis, click Yes. 
5. Then, on the screen titled Enter Prior Year Roth IRA Contributions, this is asking for your total contributions for years prior to 2025 (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.

[Debi2025]

Yes, thank you.  That is it.  Prior to your response, I found a way to enter the $250 that was contributed to the Roth in 2025.  TT only asked me about contributions prior to 2025 ($1750).  Since the 2025 contribution of $250 wasn't there, $86 of the 1836.84 was being taxed as it exceeded the $1750 and appeared to be earnings.  

Now the problem is that New York State is still taxing the distribution (and apparently assessing a penalty) but they follow the feds so it should not be.  

[Debi2025]

I was self-computing the NYS tax wrong so there is no error!  Thank you for your quick reply!