topic early withdrawal from Roth IRA after previously withdrawing the conversion basis in Retirement tax questions

early withdrawal from Roth IRA after previously withdrawing the conversion basis

Jabber213 — Tue, 16 Mar 2021 15:38:12 GMT

I converted $100,000 of 401k money into a Roth IRA in 1998. After many years, I withdrew that conversion basis (two separate $50,000 withdrawals). This year, I withdrew $68,000 from what the earnings that remained. I am 58, so I expected to pay the 10% early withdrawal penalty ($6,800). However, TurboTax so far is letting me off the hook for that. I suspect I'm doing something wrong. Or did I just get lucky? (Note: I didn't take a hardship withdrawal due to COVID or anything else.)

Re: early withdrawal from Roth IRA after previously withdrawing the conversion basis

macuser_22 — Tue, 16 Mar 2021 15:51:03 GMT

You can always withdraw your own Roth contributions tax and penalty free.

Enter a 1099-R here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

One of the followup questions will ask for your prior year** contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.

If you have already removed all the "basis" then the prior year contributions will be zero leaving only the earnings.

Re: early withdrawal from Roth IRA after previously withdrawing the conversion basis

DanaB27 — Tue, 16 Mar 2021 16:02:25 GMT

Please make sure you answer all you the follow up questions in TurboTax after you entered your 1099-R.

Open your return
Click on "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Click "Continue" and enter the information from your 1099-R
On the "Your 1099-R Entries" screen click "continue"
Continue answering question until the "Any Roth IRA Conversion" and answer all questions carefully.

TurboTax will then calculate the 10% early withdrawal penalty