From my understanding, contributions to a Roth IRA can always be withdrawn tax-free and penalty-free, regardless of the 5-year rule, since they’re made with after-tax dollars. However, TurboTax is calculating $150 as a tax liability for this withdrawal. Here’s what I’ve done so far: I entered my 1099-R correctly. Box 7 shows a "J" code. I entered my Roth IRA contribution history, but TurboTax only asked for contributions before 2024, and I cannot specify my 2024 contribution. I selected "I did something else" when asked about rolling over the funds since this was a withdrawal, not a rollover.
Your understanding of the non-taxable nature of taking a distribution from your Roth IRA contributions is correct.
Once you have entered your 2024 Roth IRA contribution, then your distribution from the Roth IRA should be non-taxable as long as it does not exceed your contribution.
The steps needed to enter the 2024 Roth IRA contribution can be found in the following TurboTax help article:
The distribution from my Roth should not be taxable despite not meeting the 5 year period; cash was used to fund the Roth and cash was distributed so there was no additional gain. My 1099-R is coded at T. How do I input the distribution to ensure that only the conversion to Roth is taxed, not the distribution from it?
If you did not meet the 5 year period then please make sure you enter your net contributions prior to 2024 and the conversions prior to 2024 in the Roth follow-up questions:
If you made a Roth IRA contribution for 2024 then please make sure you enter it in the IRA contribution section:
Please see Distributions of conversion and certain rollover contributions within 5-year period for additional information.