What code is on your 1099?
Some Roth IRA distributions may be partly taxable. Form 1099-R, box 7 codes J, Q and T identify a Roth IRA distribution, and determine the tax treatment.
- Code Q means the requirements for tax free distributions are met. This distribution is not taxable.
- Code J means an early withdrawal where the 5-year holding period is not met and there is no known exception. The earnings are taxable and without an exception, a 10% penalty applies.
- Code T means an early withdrawal and it is unknown if the 5-year holding period has been met and an exception applies. If the holding period is not met, the earnings are taxable.
For both Codes J and T, an exception means you are age 59½ or over, disabled, or the participant has died, so there is no penalty.
If you did not see the questions about the Roth basis as you entered the Form 1099-R, an additional way to enter the basis of your Roth IRA is this.
- On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner)
- This opens a box where you can type in “Roth Ira” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
- The search results will give you an option to “Jump to Roth Ira”
- Click on the blue “Jump to Roth Ira” link
This will bring you to a screen with check boxes to indicate what types of account you had in 2020. Be sure that Roth IRA is checked. Click Continue.
If Traditional IRA is checked or if you have a spouse that had either type of account, the next questions will not pertain to your Roth IRA. Continue through this section until you are asked whether you made any contributions to your Roth IRA for 2020. This is the beginning of the section where you will enter details about your Roth IRA, including the basis.
Continue answering the questions according to your situation. On the screen where you see Let Us Track Your Roth IRA Basis, click Yes.
Then, on the screen titled Enter Prior Year Roth IRA Contributions, this is asking for your total contributions for years prior to 2020 (basis). If your basis exceeds your distribution, then the distribution will not be taxable.
Finish the rest of the follow-up questions about your Roth IRA.
