Early Roth withdrawal - unsure of prior contribution amounts / basis

[scotttiger]

Hi,

I took an early withdrawal from both a regular and a Roth IRA to pay for higher education late last year. Being out of work, I held them for nearly 60 days hoping I would not need them, but ultimately deposited them in my checking account. I kept the code in box 7 as 1, and then went through questions that clarified that these were not subject to an early withdrawal penalty.

First off, can one clarify whether these are counted to my 2022 taxes, or possibly is there a way to credit the deposits to my 2023 taxes? Since my income will be much less than last year, these withdrawals would be taxed at a lower rate than in 2022. (Bonus for me if the 2023 option exists...)

The other problem I am writing about surrounds the question that asks the amount about prior contributions (before the prior 5 years). I must've started contributing 20 or so years ago and then stopped. I did a few conversions since I started using TurboTax, so thankfully it keeps track of those amounts. However, I cannot find my records on total prior contributions for the Roth and small early withdrawals of my basis. I am estimating $50K - 60K remains, but I am just not sure exactly what my basis is now. 

I put in $50K for that value in TurboTax and moved on, but clearly I do not want to trigger anything. What should one enter in this case? Is an estimate adequate? The withdrawal was only $2.5K, so I am hoping that since the basis is so excessively large compared to it, it should be fine. 

Thoughts?

Thank you.

[Cynthiad66 · Accepted solution]

First, the 2023 option is NO.  Transactions must be reported in the year it occurred.

Calculate your Roth IRA basis by adding up all your contributions and subtracting any distributions you've made. Roth IRA basis comes into play when you make withdrawals from your account that may be subject to taxes or penalties.

Estimate as best you can.

[scotttiger]

Thank you so much for the reply.

I will estimate the basis as best as I can.

[Opus 17]

Regarding the Roth IRA.  Withdrawal of contributions is tax-free.  Withdrawal of conversion amounts is tax-free if the conversion was more than 5 years ago or you are over age 59-1/2, or you are using the money for higher education expenses or one of the other exceptions; otherwise there is a 10% penalty for early withdrawal on conversions but no income tax.  

The problem is that while the IRS receives copies of documents from your IRA custodian and should know your contribution and conversion basis, they don't have to prove it, you do.  If audited, and you can't prove your basis, the IRS can assess tax.  After you turn 59-1/2, it won't really matter, but until then, it could be important for you to know your contributions and conversions (including the dates) so it would be worth it to spend some time reconstructing your basis from your tax records and the contribution records from the IRA custodian.

Withdrawals from a traditional IRA are subject to regular income tax but are exempt from the 10% penalty for early withdrawal if you use the funds for qualified higher education expenses.

Unfortunately, the withdrawal is taxed in the year it was made.