Roth IRA Basis

Years ago (2000 and 2001) I contributed a total of $4000 to a contribution Roth IRA ($2000 in each year). The contributions were made in post-tax
money as required. I never contributed any additional money to the Roth, which was invested in mutual funds. Eventually, the Roth grew to $21,500, and in 2017 (when I was age 67) I withdrew the full amount. Based on my understanding of Roth IRAs, the full amount of my withdrawal should be tax-free.
But when I enter the information into my tax software, it comes up and asks me to enter my "basis in the Roth IRA contributions". I thought the "basis" would be the amount of my contributions, which would be $4000. But when I enter $4000, the software tells me I owe tax on $17,500, which is basically the earnings on the Roth. That can't be right, because as a taxpayer over 65 who had the Roth for 18 years, the full amount of the distribution should be tax-free. Am I misunderstanding the definition of "basis"?
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On Sat, 17 Mar 2018 00:27:46 EDT, Rick wrote:

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?
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Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
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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
On Saturday, March 17, 2018 at 10:13:46 AM UTC-4, Stan Brown wrote:

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"Stan Brown" wrote in message

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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On 3/17/2018 10:39 AM, Rick wrote:

Care to share? Helping here is not a one way street.
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"Taxed and Spent" wrote in message

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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On 3/17/2018 9:13 AM, Stan Brown wrote:

Beware: If you use Turbo Tax. It will call any Rothwithdrawal as taxable income!!
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On 3/16/18 9:27 PM, Rick wrote:

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.
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"Alan" wrote in message

Actually it was coded as a T in Box 7.
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On 3/17/18 10:41 AM, Rick wrote:

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.
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"Alan" wrote in message

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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