Retirement tax questions
Yes, you are correct in that a Code T in box 7 will be deemed as a non-qualified distribution. However, if there is a Code T in box 7 of the 1099-R, and the distribution was made after the five-year taxable period, it will be considered a qualified distribution and not taxable in NJ.
In a previous post you mentioned that the firm will not determine for you whether the Roth distribution was qualified or not; however, you indicated that such distribution was in fact qualified. Given these facts, enter Code Q in Box 7 on the relevant page in the federal section of TurboTax. In our test return, which was prepared using TurboTax online, our Code Q entry for Box 7 resulted in no federal tax for the inherited Roth IRA and no NJ tax for the inherited Roth IRA.
As you enter the inherited Roth IRA information in the federal section, you may see the page "Review your 1099-info." Click Continue to proceed through the remainder of the application. When we opened the state section, and began to complete our test NJ return, we did see the page below which indicated that our Roth IRA was not taxable income in NJ. As a reminder, keep all of your records that support your position that the inherited Roth IRA was a qualified distribution.
