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New Member
posted Apr 4, 2021 2:09:35 PM

I received roth ira distribution. 1099r shows it code J but it is qualified because it as all contribution, not earnings. Turbo tax is taxing it. How do I fix this?

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24 Replies
Expert Alumni
Apr 4, 2021 2:35:35 PM

Code J:

Early distribution from a Roth IRA

Use Code J for a distribution from a Roth IRA when Code Q or Code T does not apply. 

 

Code J indicates that there was an early distribution from a ROTH IRA. The amount may or may not be taxable depending on the amount distributed and the taxpayer's basis in ROTH IRA Contributions. This information must be entered for the software to calculate the taxable amount.

Level 15
Apr 4, 2021 6:07:58 PM

To reach the question in TurboTax that asks for your basis in Roth IRA contributions, click the Continue button on the page that lists the Form 1099-R that you've entered.

 

Also, this is an early distribution, not a qualified distribution, requiring Form 8606 Part III to be included with your tax return to show the calculation of the taxable amount (which will be zero if the distribution was less than your contribution basis).  TurboTax will automatically prepare Form 8606.

Level 1
Feb 16, 2022 2:56:01 PM

I am trying to follow your instructions but I'm not getting to Form 8606 at all. I've tried searching the help section for Form 8606 and there are instructions of how to get it kicked off but it seems outdated because it says to search for an exact term and there will be an option that shows up, but when I follow those instructions I don't get that to show up.  Any advice on how to kickstart Form 8606?

Level 15
Feb 16, 2022 3:18:21 PM

@toastabreads , what is your reason for needing Form 8606?  If it's the same as indicated in the original question that started this thread, that you received a code-J Form 1099-R, there is no avoiding TurboTax including Form 8606 in your tax return; entry of a code-J Form 1099-R forces the use of Part III of Form 8606 to calculate the taxable amount from the amount in box 1 of the Form 1099-R and the additional information you provide after clicking the Continue button on the page that lists the 1099-Rs that you have entered.

Expert Alumni
Feb 16, 2022 3:18:51 PM

To kickstart Form 8606 follow these steps:

  1. Open your return if it isn't already open.
  2. Inside TurboTax, search for this EXACT PHRASE, INCLUDING THE COMMA: 8606, nondeductible ira contributions
  3. Select the Jump to link in the search results.
  4. Proceed through the IRA section, answering questions as you go.
  5. When you reach the screen Any nondeductible contributions to your IRA? answer Yes, then continue. We'll generate and fill out the 8606 behind the scenes.

Level 1
Feb 16, 2022 3:23:20 PM

Thanks for your help @dmertz!

Yeah it was the same reason as above. I guess I was expecting to see the form, and not just have it done in the background. Thanks for clarifying. I just see that TurboTax is considering this as taxable, but for the same reasons as mentioned above, I think this is in error and want to fix it and my understanding was I do this via Form 8606.

 

 

Level 1
Feb 16, 2022 3:37:17 PM

Ok, I found the answer to my question. I went to "Tax Tools" in the bottom left of the screen, then clicked Tools, and searched for Form 8606 and it went to that page for me where I was able to input the information needed.  Hopefully this helps anyone else that comes behind me and sees this post 🙂 

New Member
Feb 19, 2022 10:27:33 AM

I used the withdrawal (under 7k) from a Roth IRA to buy my first home, in the 1099-R the code in box 7 shows as J, I believe I am entitled to a hardship deduction and the withdrawal not subject to an early withdrawal penalty or tax on any gains, turbotax does not seem compute such a break.  Would appreciate any insights. Thanks

Expert Alumni
Feb 19, 2022 11:16:54 AM

Yes, if you had qualifying expenses for your first home then you do not have to pay the 10% early withdrawal penalty and the distribution will not be taxable if you had the Roth IRA for 5 years since it is a Qualified Distribution (up to $10,000).

 

Please follow these steps:

 

  1. Login to your TurboTax Account 
  2. Click on the "Search" on the top and type “1099-R”
  3. Click on “Jump to 1099-R”  and enter your 1099-R
  4. Answer "yes" when TurboTax asks if you used the money to buy your first home and enter the amount.
  5. Click "continue" after all 1099-R are entered and answer all the questions.
  6. Continue until "Did you use your IRA to pay for any of these expenses?" screen (this screen won't come up if you only withdrew your contributions) and enter the amount under "First Home Purchase".

 

 

For your information, you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. Please make sure you are entering your net contributions to the Roth IRA when TurboTax asks.

 

 

 

 

@reggie13955

Level 2
Mar 24, 2022 9:27:18 AM

@toastabreads  thank you for mentioning the details. Did you withdraw from contributions before 5 years since you first contributed to that ROTH IRA account? If yes, did 8606 form help you in avoiding taxes and penalty on Roth IRA? I mean, did you get refund? I did withdraw thinking there will not be taxes or penalty if it is from contributions, not earnings. But TurboTax and other tools are taxing it. I even contacted some tax agencies and they were unable to help me.

Level 1
Mar 24, 2022 9:44:26 AM

@Dpuperu it did thankfully! It went from me having to pay 5-6k to receiving a return of 5-6k which was in-line with what I expected.. so I am just VERY happy that I did this process and didn't pay even more money 🙂  I also reached out to TurboTax pros and they were kind of at a loss, but this completely saved my tax return. Hopefully it does that same for you!

Level 1
Mar 24, 2022 9:46:18 AM

I remember seeing Turbo Tax ask me if I used my withdrawal for a home purchase or if it was hardship, so I would strongly recommend going down the same rabbit hole as me with this 8606 form and I think you'll find what you need. Don't give up! You'll get that money back I'm sure 🙂 

Level 2
Mar 24, 2022 11:11:04 AM

@toastabreads Great! I'm happy for you. I started the filing process in January and I still did not complete filing as I didn't want to pay double taxes and penalty. Some tax agencies told me that it I'm supposed to pay taxes and penalty as my ROTH IRA was opened just an year ago (should be 5 years or more). But I don't think is it correct. That's why I asked you if yours was active for more than 5 years.

I finally found your post that matches my situation. And with your help I was able to find 8606 form. I hope I will be able to get my money back. Thank you.

Level 1
Mar 24, 2022 11:24:17 AM

Yeah I don't believe the 5 year thing applied to our situation either.. but at least we'll be in the same boat if we get audited lol! Good luck!

Expert Alumni
Mar 24, 2022 11:42:19 AM

It depends.  The following information provides the details about the 5-year rule. A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

It is made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit.

 

The payment or distribution is:

  • Made on or after the date you reach age 59½,
  • Made because you are disabled (defined earlier),
  • Made to a beneficiary or to your estate after your death, or
  • One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).

Exceptions.

You may not have to pay the 10% additional tax in the following situations.

  • You have reached age 59½.
  • You are totally and permanently disabled.
  • You are the beneficiary of a deceased IRA owner.
  • You use the distribution to buy, build, or rebuild a first home.
  • The distributions are part of a series of substantially equal payments.
  • You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income (defined earlier) for the year.
  • You are paying medical insurance premiums during a period of unemployment.
  • The distributions aren't more than your qualified higher education expenses.
  • The distribution is due to an IRS levy of the qualified plan.
  • The distribution is a qualified reservist distribution.

Level 2
Mar 28, 2022 7:34:21 PM

@DianeW777 Thank you for the information. But does the same apply if the distribution is taken from contributions, not earnings? In most of the references I found, I see that if it is from contributions we can withdraw anytime tax free and penalty free.

Level 15
Mar 29, 2022 3:55:19 AM

@Dpuperu , because your first contribution to a Roth IRA was less than 5 years ago, distributions from your Roth IRA are not qualified distributions.  Click the Continue button on the page that lists the Forms 1099-R that you have entered and, when 2021 TurboTax asks, enter the amount of your Roth IRA contributions made for years prior to 2021.  TurboTax will prepare Form 8606 Part III to calculate the taxable amount of your distribution, which will only be the earnings that were distributed from the Roth IRA.  Your original contributions are distributed first, earnings last.

New Member
Apr 11, 2022 4:43:47 PM

Well, in my situation, I haven't made any contributions to the ROTH, as it is inherited. Since it is 5 years since any money has been added (if not more), and I have to take all of the money within 10 years anyway, I cashed this ROTH out to make a downpayment on my house. 

 

As far as I can tell, it should be non-taxable, but it is showing up as taxable (and quite a sizable number too). How can I fix this, or do I just give up and use a different tax service? Phone support / chat was no use, person couldn't see past the script they were reading. 

Level 15
Apr 12, 2022 4:57:41 AM

@mdh0905 , when entering a Form 1099-R that reports a distribution from an inherited Roth IRA, TurboTax requires that you enter the taxable amount inbox 2a of TurboTax's 1099-R form despite the fact that box 2a is blank on the form provided by the payer.  Since it's been more than 5 years since the decedent made the first contribution to the Roth IRA, enter a zero in box 2a of TurboTax's form.

New Member
Apr 12, 2022 9:55:21 AM

No dice. I put in the 0 dollar amount for box 2a, and I'm still showing a huge tax on it. I am under 59 1/2, but I'll still be under the age in 5 more years... 

Level 15
Apr 12, 2022 2:25:32 PM

You must also answer Yes when TurboTax asks about this being an inherited account.  (I'm assuming that you are not a surviving spouse who chose to treat the Roth IRA as your own.  If you were and did so, the account is no longer an inherited account.)

 

Death of the participant eliminates the age requirement for qualified distributions from an inherited IRA.

New Member
May 15, 2022 1:36:21 PM

I had the exact same scenario where I had to add in my ROTH-IRA contributions and it reduced my federal taxable amount to 0. My state taxes however are still viewing the distribution as taxable since the distribution code J is still entered.  How can I get this amount to be nontaxable for State as well?

New Member
Jan 21, 2023 11:01:35 AM

@toastabreads THANK YOU SO MUCH! Just the answer I needed. 

New Member
Oct 2, 2023 9:33:32 AM

I DID THE WITHDRAWAL TO TRANSFER TO WELLS FARGO NOT TO PUT IN MY POCKET.