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Level 2

1099-R may have the wrong code

Hello and thank you in advance for the help.

 

I withdrew contributed funds from my Roth IRA, not gains just an amount I contributed before. I received a 1099-R from my bank with a J code saying that it was an early withdrawal. Is the code wrong or do I just have to play with the system to make it not tax me?

I'm also confused because at the "Here's a picture of your income tool" it counts the amount as "IRA Distributions - Nontaxable" income but wouldn't it have counted as income the year that I placed it into the Roth because it was previously taxed?

5 Replies
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Expert Alumni

1099-R may have the wrong code

No, the code J is fine. What you need to do is report a basis in your Roth IRA. 

 

Here is how to do that:

  1. Search for IRA contributions using the search box located in the upper right corner .
  2. Click on  Jump to IRA contributions.
  3. Check the box showing that you contributed to a Roth IRA.  
  4. The next screen asks you to verify that you contributed to a Roth IRA, choose Yes.
  5. If you didn't contribute to the account in 2019, just enter $0. 
  6. The next screen asks if the contribution was a repayment of a retirement distribution, choose No.
  7. Answer the remaining questions according to your situation. After a few more questions you will be asked about your contributions in the past.

Any distribution coded J will be nontaxable until your recover the amount that you have contributed in the past. By entering your basis in the account, the early withdrawal penalty will go away as well. 

 

 

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Level 15

1099-R may have the wrong code

From your description it sounds like it is being treated correctly as nontaxable income.  you can verify that it is not being taxed by seeing that the gross amount is included on Form 1040 line 4a but is excluded from the amount on line 4b.  The calculation of the taxable amount is done on Part III of Form 8606 included in your tax return.

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Level 2

1099-R may have the wrong code

That worked and it does not show tax penalties. I am still confused as to why it is considered part of my total income for 2019?

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Level 15

1099-R may have the wrong code

That's the way it's defined in the tax code.  "Income" just means that it must be present on your tax return.  Any distribution is income, some are just not taxable income as is the case here.  Nontaxable income must be reported, but it doesn't affect anything on your tax return (other than it must appear on line 4a in this case).

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Level 2

1099-R may have the wrong code

Okay, I just wanted to make sure it didn't make a difference in tax brackets or anything like that, thank you! I'm still looking for the other Form you mentioned. I appreciate it!