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Roth IRA cost basis withdrawal

I recently sold and withdrew a portion of my Fidelity Roth IRA with the understanding that, if this is taken from the cost basis and not the gains, there is no tax penalty for early withdrawal.  Yet, the transaction has been labeled "part premature distribution / no exception" in my Fidelity account.  How can I specify that this sale was from the cost basis?  Will Turbotax automatically do this when I file?


    I would expect the 1099-R form Fidelity to be coded J, Early distribution from a Roth IRA, since the transaction label you quoted indicates that you had not yet reached age 59 1/2.

    For tax purposes, all Roth IRAs are lumped together.    Because Fidelity has no way of knowing about any other Roth IRAs you might have or any withdrawals you may have taken from them, the 1099-R will also likely have box 2b checked, Taxable amount not determined.  TurboTax will ask about your all of your Roth IRA contributions and withdrawals so that TurboTax can determine if the withdrawal is taxable, then report it on Form 8606 Part III accordingly.  As long as your total withdrawals from your Roth IRAs have not exceeded your total contributions, this withdrawal will not be taxable.

    • this is exactly my case.  How do I answer the questions so Turbo Tax knows that the withdrawal was my cost basis?
    • The most reliable way I've found to get to the point in TurboTax where you tell TurboTax about the basis in your Roth IRAs is under Deductions & Credits > Retirement and Investments > Traditional and Roth IRA Contributions.  Indicate that you have a Roth IRA and step through the questions that follow until you reach the one that asks if you want TurboTax to track your Roth IRA contributions.  Indicate that you do and tell TurboTax the amount of your prior contributions.

    If the amount of distribution does exceed the contribution amount, does the entire distribution then become taxable, or just the difference?

    Are we talking about both the 10% penalty and the taxable income?

    • Just the difference.  It will be subject to tax and it will be subject to penalty if no exception applies.
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