I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.
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New Member

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

What documentation should I dig out to send to the IRS to verify this?
8 Replies
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Level 15

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

Was the distribution (1099-R) reported on your tax return along with a 8606 part III attached that reported the Roth basis.  If not reported, the IRS will assume that it was all taxable.   (I assume this was a 2014 tax return).
**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.**
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Level 6

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

Also, you should have received a Form 5498 each year which documents your Roth contributions for the tax year.
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New Member

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

Yes it's from 2014.  I'll dig a little deeper, but it looks like I missed the 1099-R.  Sounds like the first step here is to locate that form, along with 5498.
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Level 15

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

Yes, any distribution must be reported on a 1099-R.   You should be able to get a copy form the IRA custodian or it might be on their website if you have an online account.

You probably should answer the IRS letter at the address on the letter and attach an amended 2014 tax return properly reporting the 1099-R to a copy of the letter rather than just explaining it.

 See this TurboTax FAQ for help with amending:  
 
https://ttlc.intuit.com/questions/1894381-how-to-amend-change-or-correct-a-return-you-already-filed

Enter a 1099-R  here:

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR  Use the "Tools" menu  (if online version under My Account) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type:  Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

One of the follow-up questions will ask about prior year Roth contributions and conversions.   Your own contributions will not be taxable.    TurboTax will automatically create the 8606 form to show the non-taxable basis that will be part of the amended return.   Be sure to attach a copy of the 1009-R.
**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.**
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New Member

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

I am in this same situation, I submitted an amended return with all the documentation stating that my withdrawal was only what I contributed to the roth. They have had they return for 5 months and keep sending me notices to pay! So stressful, was your issue resolved? 

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Level 15

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

Did the documentation that you sent include the required Form 8606 Part III for reporting nonqualified Roth IRA distributions?  Without that form the IRS must treat a nonqualified Roth IRA distribution as fully taxable.

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New Member

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

I believe so, I had my CPA submit the return and I think I do remember seeing that one. The only forms I had to gather for them myself is 5498s. We called them and they said it was still in the review process but they have had the return for months! The notices are not stopping and getting more and more threatening. I almost want to go ahead and pay it until they figure it out. However, then I do not think I will ever get that money back. 

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Level 15

I received a bill today from the IRS trying to collect tax on withdrawal made from a Roth IRA. The withdrawal is from principal and shouldn't have been taxed.

I suggest contacting the Taxpayer Advocate Service within the IRS if you have not already done so:  https://taxpayeradvocate.irs.gov/contact-us

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