Roth IRA Basis

Mine too. That's the whole idea of a Roth: the principal is tax-free because you've already paid taxes on it, and the gains are tax-free because the law says so.

The other possibility, I think, is a bug in the tax software (which you didn't name). Maybe you should address customer support of the software?

I do not know what software you are using so I do not know whether you are using it correctly. That said, you can force the distribution to be tax-free (which it is) by entering the amount of the total distribution as your basis. The IRS will not question this.

By the way, the 1099-R you received should have a Code Q in Box 7 that signifies it is a qualified Roth distribution.

I expect that you're entering the distribution incorrectly in your software. The program is assuming that the Roth IRA has been open less than 5 years, making any earnings taxable.

Ira Smilovitz, EA

I did contact support, and it turns out I entered everything correctly but answered another question the wrong way. When I changed my answer on that, it all worked fine.

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Beware: If you use Turbo Tax. It will call any Rothwithdrawal as taxable income!!

Actually it was coded as a T in Box 7.

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Care to share? Helping here is not a one way street.

The software had asked if I had made a contribution to a Roth IRA for 2012 or an earlier year. I answered the question "no" because in my mind I had not made any contributions to the account since opening it. But of course I had forgotten that the $2000 I deposited in 2000 to set up the account was a contribution and that I made one other contribution in 2001. After that I never contributed again. By answering no, the software assumed I must have funded the account after 2012, meaning I had held it less than five years. II t was just a misread on my part

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A T would have been used if the trustee did not know if you met the 5 year holding period but did know your age was over 59 1/2. Assuming you had not changed trustees during the previous 5 years, the trustee should have used a Q.

I did change trustees after opening the account, but that was in 2010. So the trustee clearly knows my age and that the account was open more than five years. But I guess they didn't know how it was originally funded back in 2000-01.

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