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Help! Roth IRA withdrawal of contributions only raises my state income tax?

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  • #1

    Help! Roth IRA withdrawal of contributions only raises my state income tax?

    In 2012 I made a Roth IRA withdrawal of contributions only (I didn't withdraw any of the market fluctutation)
    My taxact.com software is correctly seeing that this is NOT taxable and doesn't get a penalty for federal tax purposes - but my state income tax went up as soon as I entered it. grr!

    So my question is: which IRS form do I need to fill out so my state tax calculation will know that I was withdrawing my contributions only? It shouldn't be taxable. For federal tax I had to fill out form 8606 with my "Roth IRA basis" which is the total amount that I contributed.
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  • #2
    Also I confirmed that PA should not be taxing this withdrawal:

    "Distributions from an IRA, including a federal Roth IRA, are taxable to the extent the distribution exceeds your previously taxed contributions."

    How do I determine if my IRA withdrawals are subject to PA income tax?
    https://revenue-pa.custhelp.com/app/answers/detail/a_id/365/~/how-do-i-determine-if-my-ira-withdrawals-are-subject-to-pa-income-tax%3F


    My withdrawal doesn't exceed my previous contributions ... I just need to know which IRS form to fill out so that PA will calculate this correctly.

    Ugh, I hate taxes.

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    • #3
      Never mind......... I entered it on PA's direct file website instead of TaxAct and it was calculated correctly. TaxAct just has a bug, I suppose.

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      • #4
        it does not.

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        • #5
          Originally posted by ~bs View Post
          it does not.
          Yeah I know, I was just complaining that taxact.com thought (wrongly) that it should be taxed. I fixed it though...I just did my state taxes on my state's website instead of taxact.com.

          Makes me nervous, now I'm worried that taxact.com might have other bugs I think I'm going to start doing my taxes in multiple websites from now on just to double-check them against each other.

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          • #6
            Originally posted by kaleida View Post
            Yeah I know, I was just complaining that taxact.com thought (wrongly) that it should be taxed. I fixed it though...I just did my state taxes on my state's website instead of taxact.com.

            Makes me nervous, now I'm worried that taxact.com might have other bugs I think I'm going to start doing my taxes in multiple websites from now on just to double-check them against each other.
            That's one of the problems that can arise when people do taxes themselves and don't really have an understanding of the tax law. YES if you plug numbers into the tax programs, it will spit out a return for you, but if you input numbers into a wrong field, or don't check mark something, it may do the return incorrectly. Also, the softwares may not have all the tax variables coded correctly into their software, especially for state returns. Even software that the professionals use will generates returns with errors, and the accountant needs to go back and figure out why the return isn't being calculated correctly.

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            • #7
              Question to Kaleida

              I am in the similar situation where I withdrew excess contributions. I need to enter my basis in the form 8606. How did you do that? For me, taxact is not recognizing it and seeing that to be completely taxable.

              Also when you enter the basis up until 2012, do you include the 2012 contributions you are about to make?

              Thanks,
              Hemanth.

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