1099-R form Code T

[salsfirst]

Last year I changed financial institutions from Ameriprise to Osaic.  When I got my 1099-R for a Roth distribution from Ameriprise it was coded Q for Qualified distribution, as I am 65 and have not contributed to the Roth in 8 years.  But when I got 2 1099-R from Osaic for 2 Roth distributions they were coded with a T for exception applies.  I'm assuming that is because they didn't know I have had this Roth for over 5 years.  Where do I enter into TurboTax that this is a Qualified distribution?  I imported the forms and when I go back to edit them there is no way for me to identify this.  What should I do?  Should I delete it and start again?  Did I miss some key questions?

[dmertz]

Click the Continue button on the page that lists the Forms 1099-R that you have entered and 2023 TurboTax will ask if you had a Roth IRA before 2019.  Answer Yes and TurboTax will treat code T the same as code Q.

[salsfirst]

Yes, I clicked the button that says I had the Roth IRA opened before 2019.  The federal form picks it up correctly but the Massachusetts state form X has it as taxable.  Is there a bug in Turbotax state?

[CatinaT1 · Accepted solution]

Many things have been corrected in the latest updates to TurboTax. Are you still experiencing this problem?

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[SHAMUS2K]

I have same issue.  Code T is recognized as non taxable on Fed return but not Mass return.  TurboTax help told me to change code to Q.  It does fix problem but conflicts with the 1099 data.  Will this generate an audit because conflicting data

[SHAMUS2K]

Same problem minutes ago. 

[SHAMUS2K]

This is regarding 2024 turbo tax 

[DaveF1006]

Yes, an IRS inquiry may occur because of the change in the distribution code.. If it does happen, you could explain that this was the only way you could report your 1099R and have it appear as non-taxable on your federal and Massachusetts returns. You were advised to do this by Turbo Tax. 

[dmertz]

With no tax withholding show on the Form 1099-R, the details of your 1099-R entry are not transmitted to the IRS and the IRS would have no way to know that you selected code Q instead of code T.

[JEFFCT]

I am having the same issue with Massachusetts.  I was forced to migrate to a new custodian who does not have proof that I have had Roth's for 5 years or more (box 7 is a T instead of Q).  Turbo desktop in step by step asks in followup questions "were my roths set up before 2020?"   As soon as I answer yes, it changes the entire distribution to not qualified and taxable in Massachusetts.  The federal remains qualified. I immediately went to forms view ira information worksheet and it shows for line 22 opened a roth ira before 2020 and it is checked yes indicating it is a qualified distribution.  It next asks if any withdrawals made before 2024 and I answer no but it states I may have to pay taxes (why?) Then it asks about sum of contributions excluding conversions which would be near impossible since I opened my first roth in 1999 to 2000 as if it is calculating a potential tax due using order of withdrawal (why?) I exit entire question and answer following 1099R section and it shows that I owe Massachusetts tax on the whole distribution which it shouldn't.  I went into the forms view and it clearly adds the distribution to my Mass Form 1 income which it shouldn't.  If I over ride the 1099R box 7 and put a Q instead of T, the Massachusetts tax due on the distribution disappears.  A previous post stated this and a response was to over ride box 7 and change the 1099R as a simple fix but I really believe TT should update its desktop version as there is almost a month left until the return is submitted.  I can't even find a way to complain about this problem to TT.

[DaveF1006]

It depends. I think the the issuer of the 1099R may have coded this incorrectly because he/she was uncertain whether or not the five-year holding requirement was met thus making this an unqualified distribution for Massachusetts state reporting purposes.  

At this point, you may change the code to Q or request a corrected 1099 R listing Code Q in Box 7, instead of T.

[dmertz]

Because the new custodian does not know if the holding period was met, code T is the correct code to be ion this Form 1099-R.

As I said above, the IRS will be unaware that you changed the code to Q for entry into TurboTax because this detail is not sent to the IRS unless the Form 1099-R shows federal tax withholding in box 4.