Why is my Roth IRA withdrawal distribution taxable and subject to a 10% penalty?
If you took an early withdrawal of your Roth IRA, only the investment earnings on the Roth IRA are subject to taxation and the 10% penalty.
Right after the 1099-R screens, there will be a screen called Roth IRA Basis; this page asks for any basis in Roth IRA contributions and any basis in Roth IRA conversions. The only thing that is taxable and subject to the 10% penalty are the earnings from your Roth IRA account. The amounts entered for the Roth IRA basis and conversion basis will reduce the taxable amount. If the basis is more than the Roth distribution then none of it will be taxable or subject to the 10% penalty.
Right after the 1099-R screens, there will be a screen called Roth IRA Basis; this page asks for any basis in Roth IRA contributions and any basis in Roth IRA conversions. The only thing that is taxable and subject to the 10% penalty are the earnings from your Roth IRA account. The amounts entered for the Roth IRA basis and conversion basis will reduce the taxable amount. If the basis is more than the Roth distribution then none of it will be taxable or subject to the 10% penalty.
