Qualified ROTH IRA Distribution

Forum|Forum|3 years ago
December 6, 2022
5 replies
48 views

I am trying to figure out where and how to enter a qualified ROTH IRA distribution. I am over fifty-nine and a half and have held the ROTH for over five years so the distribution should not be taxed. one problem is that I have owned the ROTH much longer than I have used Turbotax so all the contributions have not been entered into the Turbotax tracking portion.

1. How can I correct the tracking issue?

2. Where and how do I correctly enter the qualified distribution to avoid being taxed?

Critter-3

Level 15

Have you gotten the 1099-R form for the distribution yet ? When you do you enter the info from the form into the 1099-R entry section and enter all that information when asked on the following screens in that section.

You do NOT need to enter all the prior year tracking information in the IRA section.

MTVAuthor

Level 2

You provided a pivotal question to the answer. I have not received a 1099-R yet and I do not know if I even will receive one since it is a qualified distribution that is tax-free. The more significant issue is with the Turbotax software program which does not allow you to enter ROTH contributions from previous years beyond last year. This is problematic if, for example, you have been making ROTH contributions for 12 years and only used Turbotax for 7 years. That results in Turbotax not tracking 5 years and as you take qualified distributions Turbotax will eventually want to pay a tax for a qualified distribution. If you manipulate the program it does not like it and gives you errors.

NCperson

Level 15

@MTV - I guess i am not tracking on your issue and the relevance. if you are over 59.5, have had the Roth open for at least 5 years, and you follow what the 1099-R states, what is the need for TT to track the contributions?

I would expect you would receive the 1099-R....suggest calling the Administrator today to confirm that - might resolve a lot of confusion.

it is not true that TT will 'eventually want you to pay tax for a qualified distribution'.

1) the contributions are all tax-free upon distribution - you contributed after tax money to begin with

2) the earnings are NORMALLY tax free as well. if the contribution was made more than 5 years ago, the earnings are tax free upon distribution.

So unless you are going to withdraw earnings related to contributions from the last 5 years, isn't is a moot point? and that is only a possibility if all the contributions and related earnings from years 5-12 (back in time) are withdrawn and the contributions from four years ago is withdrawn, only then would the any withdrawn earnings from Year 4 create a taxable situation. At least that is my understanding

I think there is confusion here on the 'system of record' of what is taxable from a Roth distribution. You appear to think that is the responsibility of TT to maintain and figure out, but I sincerely believe that is the Administrator's responsibility (and reported on the 1099-R) and not TT's.

Mike9241

Level 15

for a qualified Roth distribution use the 1099-R. report the total distribution in box 1 and leave box 2a blank (or zero depending on how fickle Turbotax is) the code Q in box 7 will tell the IRS that this was a qualified Roth distribution

Mike9241

dmertz

Level 15

In addition to what Mike9241 said, to conform to the instructions for Form 1099-R you should leave box 2a blank you should mark box 2b Taxable amount not determined. Any federal or state tax withholding should be entered into the corresponding boxes.