Why does Turbotax only ask about Roth contributions *prior to* 2017 when I enter a 1099R for 2017 early distribution and not include prior 2017 contributions?

[paul10]

I made $5500 contributions in 2016 and 2017 for a total of $11,000.  I took an early distribution of 11,000 in 2017, and Turbotax shows I owe tax on $5500 because it only asks about Roth contributions made *prior to* 2017 which excludes contributions made during 2017.  That is not right.  I should be able withdraw early all  Roth IRA contributions without paying tax and only pay tax on capital gains withdrawn early from a Roth IRA.

[DS30 · Accepted solution]

It depends -

The reason why the system is asking about prior year contributions is to determine if any of these prior contributions to your ROTH IRA are considered taxable income.

You can always withdraw contributions (but not earnings) that you made to your Roth IRA tax and penalty free at any time. Additionally, the Ordering rules for withdrawals from a Roth IRA are: first from regular contributions, then from Conversion and rollover contributions, on a first-in, first-out basis and finally from Earnings on contributions.

If you take a distribution and you have any earning on your prior year contributions, then these earnings will be considered taxable income.

To enter 2017 IRA contribution information in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") type "ira contributions" in the search bar then select "jump to ira contributions". TurboTax will guide you in entering this information.

To enter 1099-R information in TurboTax, log into your tax return (for TurboTax Online sign-in, click Here and click on "Take me to my return") type "1099r" in the search bar then select "jump to 1099r". TurboTax will guide you in entering this information.

When you get to the screen that titled "Enter Prior Year Roth IRA contributions", make sure you are entering the total amount of all your previous Roth contributions. So if you contributed $5,500 to your Roth IRA in prior years, you will put $5,500 in the amount box on this screen.

Please refer to IRS - Roth IRAs - Publication 590 for more information about Roth IRAs.

[edited 1/27/2018 - 11:39PM PST]

[paul10]

There is no rollover involved here.  I made a 5,500 contribution in 2016 and in 2017 and withdrew 11,000 in 2017.  Turbotax is not asking anything about 2017 contributions.  It only asked about contributions prior to 2017 and taxes me on 5,500.

[DS30]

If you contributed to a ROTH in 2017 and withdrawn that same amount, then that would not be a taxable event unless you had earning of these contributions while they were in the ROTH IRA account.

[DS30]

Please see updated answer.

[paul10]

How is a Roth contribution Income???

[DS30]

Sorry under the deductions section. Use the jump link provided in the answer.

[paul10]

You said above to "make sure you are entering the total amount of all your previous Roth contributions."  Well that is not what TurboTax is asking.  TurboTax is asking for contributions PRIOR to 2017 and never asks about contributions made during 2017.

[DS30]

You will need to enter your 2017 ROTH IRA contributions under a different section - deductions because it related to the current tax year. You enter your 2017 ROTH distributions and prior year ROTH contributions under the Form 1099-R section of TurboTax

[paul10]

That is for a traditional IRA contribution which IS deductible.  A Roth contribution is not tax deductible.  A Roth contribution is money that has already been taxed, and TurboTax says I owe tax on the 5,500 that I withdrew that I contributed in 2017.  I am tempted to enter 11,000 in the question about prior contributions and hope I do not get audited.  If I enter 11,000, I don't get taxed on my early distribution of 11,000, and I have two prior 5,500 contributions to support it.

[DS30]

You can enter your 2017 contributions into the TurboTax software. I have added a screenshot to my answer. This would be the landing screen when you do the "jump link to IRA contributions"

[paul10]

Okay I did what you said, but that is not an intuitive procesa.  I entered my 1099R for my early Roth distribution of $11,000.  Then when asked, I entered $5,500 for contributions prior to 2017, and Turbotax showed my tax refund went way down.  Then I went to 2017 IRA contributions, chose Roth, and entered $5,500, and then my tax refund went back up to what it was before I entered the 1099R showing a complete wash as expected.  This is an extremely confusing process when I could have been asked to enter all Roth contributions prior to 2018 after entering the 1099R.  I typically do not enter Roth contributions into Turbotax because I do not get a form, and they are not tax deductible.  This should have all been handled within the section where I entered the 1099R.

[fanfare]

contributions made in 2017 must be handled separately since they impact your 2017 Traditional IRA contribution.
You should encounter a separate question for that amount.

[paul10]

I did not make any 2017 Traditional IRA contributions.  This was all done in a Roth.  5500 in in 2016 and 2017 and 11,000 out in 2017.

[DS30]

Please see additional answer.