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Retirement tax questions
If you told the Roth trustee that you wanted a "return of contribution" and not just a normal distribution, then you should receive a 2018 1099-R next January with a box 7 code "PJ" and the total returned amount in box 1, the earnings (calculated by the trustee) in box 2a. That would be reported on an amended 2017 tax return. Only the earnings (if any) will be taxable and also subject to a 10% penalty if you are under age 59 1/2.
If you just took a normal distribution then the 1099-R will just have a code "J" in box 7 if you are under age 59 1/2. You will need to file an amended 2017 return showing the excess contribution and pay the 6% penalty for 2017.
You do not need to do anything now until you receive the 2018 1099-R, but you should talk to the trustee to be sure that they will be treating this as a return of contributions and not just a normal distribution which would be subject to a 6% excess contribution penalty in 2017, but not taxable in 2018 since withdrawing your own contribution will offset any tax - in that case the earnings stay in the account.
Sometimes it is better to just pay the 6% penalty and leave the earnings in the account if the earnings were more than the penalty.
If you just took a normal distribution then the 1099-R will just have a code "J" in box 7 if you are under age 59 1/2. You will need to file an amended 2017 return showing the excess contribution and pay the 6% penalty for 2017.
You do not need to do anything now until you receive the 2018 1099-R, but you should talk to the trustee to be sure that they will be treating this as a return of contributions and not just a normal distribution which would be subject to a 6% excess contribution penalty in 2017, but not taxable in 2018 since withdrawing your own contribution will offset any tax - in that case the earnings stay in the account.
Sometimes it is better to just pay the 6% penalty and leave the earnings in the account if the earnings were more than the penalty.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
‎June 4, 2019
5:50 PM