Prior Year Roth IRA Contributions (Distribution Ordering Rules)

mikeyo1 — Wed, 25 Sep 2024 20:17:02 GMT

I am uncertain how to answer regarding Turbo Tax interview Questions about prior Year Roth IRA contributions (Distribution Ordering Rules). I am using TurboTax Desktop (TT).

Background:
I opened a Roth IRA in 2019, by a rollover of my Roth 401k ($3,540 - all from my payroll deducted contributions).
Subsequent deposits in the Roth IRA are as follows:
- in 2020, a partial rollover/conversion from my pre-tax 401k ($4,000)
- in 2021, a partial transfer/conversion from my traditional IRA ($5,000)

In 2023, I took a nonqualified partial distribution from the Roth IRA ($4,600). This was my first withdrawal. The Roth IRA remained open on 12/31/2023.

Questions:
When answering the Turbo Tax interview Questions about prior Year Roth IRA contributions, I am confused regarding the “Distribution Ordering Rules”:
1. TT Question: “Enter prior year Roth IRA Contributions. Confirm your net regular contributions prior to 2023 that remain in your Roth IRA.”
My Question: Is the initial deposit ($3,540 – rolled over from my Roth 401k) considered regular contributions?

2. TT Question: “Tell Us the Years. (Provide the) “years that you converted a traditional IRA to a Roth IRA”
My Question: Is the 2020 conversion ($4,000) from the 401k to be listed here, the same as a conversion from a traditional IRA?

Thank you!

Re: Prior Year Roth IRA Contributions (Distribution Ordering Rules)

EleanoreS — Fri, 04 Oct 2024 01:10:13 GMT

To answer your questions, rolling over a Roth 401(k) to a Roth IRA is not considered to be a contribution or conversion; it is considered a rollover.

Under the ordering rules, the contribution basis comes out first and is tax and penalty free. If you are at least 59 ½ and the Roth IRA has been open for five years, any regular distributions from your Roth IRA will be tax and penalty free.

Funds from a traditional 401(k) rolled into a Roth IRA are considered a taxable rollover as opposed to a Roth conversion. Roth conversion only applies to traditional IRAs to a Roth IRA.

Here is a link to an Intuit blog that discusses Roth IRA Withdrawal Rules and Penalties.

Thank you for joining us at the Ask the Expert event today!

topic Prior Year Roth IRA Contributions (Distribution Ordering Rules) in Get your taxes done using TurboTax

Prior Year Roth IRA Contributions (Distribution Ordering Rules)

Re: Prior Year Roth IRA Contributions (Distribution Ordering Rules)