It's a little more complicated than that, and we can sort it out for you. You should show a taxable amount that would represent only earnings in the Roth IRA. See the following information for more details. If you believe the earnings amount is incorrect in Box 2a, you should immediately contact the organization who issued the Form 1099-R.
Roth IRA beneficiaries can withdraw contributions tax-free at any time. This is about Roth IRA contributions.
- Earnings from an inherited Roth can also be withdrawn tax-free, as long as the account had been open for at least five years at the time the account holder died.
The five-year rule is critical: If the Roth IRA was less than 5 years old at the original owner’s death, you’ll owe taxes on the earnings you withdraw.
Since death is an exception to the early withdrawal penalty (10%), when a Roth IRA owner dies, beneficiaries who take a distribution will not pay a penalty—no matter whether the distribution is principal and/or earnings.
Death does not, however, eliminate the 5 tax-year rule for earnings to be tax-free. If you, as a beneficiary, take a distribution from an inherited Roth IRA that was not held for 5 tax years, the earnings will be subject to tax."
What Are Qualified Distributions? (IRS Publication 590b)
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
It is made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit.
The payment or distribution is:
Made on or after the date you reach age 59½,
Made because you are disabled (defined earlier),
Made to a beneficiary or to your estate after your death, or
One that meets the requirements listed under First Home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).
@TaxTriumph-
[Edited: 02/11/2022 | 9:08a PST]
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