I took a full distribution of my only Roth IRA in 2017 and closed it after taking the distribution. This account has been open since prior to 2001. It bounced around between several managing companies before landing at Wells Fargo Advisors. It has basically been dormant with no activity for as long as I can remember, no contributions, no withdrawals, just minor fluctuations depending on how WF decided to manage it. I basically ignored it for many years. Last December, 2017, I pulled all the money out and closed it in order to pay off some debt and better myself for an upcoming construction loan. I was informed that I would most likely be facing a 10% penalty due to not meeting any of the IRS qualifications for penalty free withdrawal.
I received a 1099R from WF, and followed all the TurboTax prompts and questions. After completion of the 1099R import and continuing down the questions, I get to the following questions and my answers:
- Did you own any Roth IRAs for at least 5 years? – Yes, I did.
- Was your Roth IRA open on December 31, 2017 – No, it was closed prior to that date when I took full distribution.
- Withdraw from your Roth IRA before 2017? – No, I did not make any withdrawals prior to 2017.
- Enter prior year Roth IRA contributions: - Here is where I have problems.
My 1099R only has a number in box one. Box 2A is empty, and 2B is checked for “Taxable amount not determined” and “Total Distribution”. I believe what I need to know here is my basis, but I don’t know this number, WF online documentation only goes back to 2011, and a phone call to WF only got another answer of unknown. I need to answer this question, or the full amount of my distribution gets counted as taxable income, which is incorrect for a Roth IRA. What should I say here, knowing that I can not pull records from prior to 2011? Should I give my end of year 2016 balance, and state that as all contributions prior to 2017? If I use the same number as in block 1 on my 1099R, there is no 10% penalty assessed, most likely because I stated that my Roth is over 5 years old. Would that be correct?
You will need to come up with a number the best you can.
Year-end balance from 2016 is not correct.
Back in the year 2000, the max amount you could put in was $2,000. So try to reconstruct how many years you may have contributed and multiply that by $2,000.
Then put this information in your tax file to show how you arrived at this number.
The attached link is a pdf for the year 2000 that shows the max amount for that year. https://www.irs.gov/pub/irs-prior/p590--2000.pdf
IRS will generally accept a reasonable method used to determine this cost basis.