Roth IRA Contribution

[vaeianor]

I'm filing my 2023 return using TurboTax. It asks me to enter "Prior Year Roth IRA Contributions" (Confirm your net regular contributions prior to 2023 that remain in your Roth IRA). 

So I have contributed $18,000 since 2020.  ($6000 in each year of 2020, 2021, and 2022).  I didn't contribute anything in 2023 but had a $3000 distribution, which I used to pay the downpayment of my first home. 

I'm not sure what number I should put there.  Should I enter $18,000 or $15,000?

And I don't understand why the number I put there makes a big difference on my return. 

I tried to have people at H&R block to do my tax. According to them, I shouldn't put any numbers in the IRA contributions section, as I didn't contribute anything in 2023.  They also said if I want to report prior year contributions, I will have to file an amended tax return.  

Please advise, 

Thanks in advance

[DavidD66]

Turbo Tax is asking for your prior year Roth IRA contributions in order to track your basis in your Roth IRA.  Withdrawals from a Roth IRA are always basis/contribution first.  Entering the prior year contributions will allow the program to show that your 2023 withdrawal is a return of basis, not a taxable withdrawal.  You should enter $18,000 for prior year contributions since your $3,000 withdrawal is for the current tax year - 2023.   You do not need to file an amended return if you report your prior year contributions.   Other than helping the program determine that your withdrawal is a return of basis, it will have no impact on your tax return.

[vaeianor]

Thanks! I'm wondering why it makes a big difference on my tax return. If I enter a number greater than $6000, my federal return increases by $1000

[JulieS · Accepted solution]

Yes, as DavidD66 said, the program is asking for the information to determine if your Roth contribution was a qualified distribution. 

You should enter each of three contributions of $6,000 for a total of $18,000 contributed prior to 2023. 

A qualified distribution is a distribution from your Roth IRA that is:

Made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit and:

• Made on or after the date you reach age 59½,
• Made because you are disabled.
• Made to a beneficiary or to your estate after your death, or
• One that meets the requirements listed for a first home purchase (up to a $10,000 lifetime limit).

Since you made this distribution as part of a first time home purchase, it is a qualified distribution as long as you contributed at least that much in a prior year. 

That means, it isn't taxable and it isn't subject to penalty even if you are younger than 59-1/2 years old. 
 

[MarkSK]

The program already knows my age (greater than 59.5) and that I have held the Roth for more than 5 years, so why does it need to figure out the basis?  i.e. why is it asking me to go to a significant amount of hassle to figure out contribution over the life of my Roth only to essentially say "oh, that doesn't matter because you meet the age and 5 year criteria? 

[DanaB27]

You can ignore the question about the net Roth IRA contributions prior to 2023 if your distribution is a Qualified Distribution and your Form 1099-R has code T or Q in box 7.

@MarkSK 

[MarkSK]

Thanks.  that's the conclusion I eventually come to, but it would have been nice if the software had taken that into account since I had already input my 1099-R from.