On form 1099-R box 2a is blank and 2b is checked. If I calculated the taxable amount using the simplified method, where do I enter that amount?

1099-R’s come in two versions.

In the first version both box 1 and box 2a contain #’s. This means that the plan custodian had the information to determine the taxable amount and did so. Enter both #’s, (even if they are the same), and TT will put the amounts on either Lines 12a & b of the 1040A or Lines 16a & b of the 1040.

In the second version, box 2a is blank and, IF there is a box 2b, it will be checked. This means that the plan custodian did not have the information needed to determine the taxable amount. Leave box 2a blank, do not enter "0". Regardless of whether or not your 1099-R has the check box, you should check it on the TT screen since that tells TT that you left box 2a blank on purpose. 

Based on your answers to all of the program's questions TT will compute the "box 2a" taxable amount and transfer it to the 1040 or 1040A.  You don't need to attempt to calculate the taxable amount yourself. 

Even though I often recommend using TT's "forms" mode, this is a situation in which you really need to use the "step-by-step" mode.

Entering information directly onto the forms will void the TurboTax accuracy guarantee per the license agreement.

After you enter the 1099-R information and continue, the follow-up questions will ask if you use the simplified method.

Thanks, appreciate the help and quick responses.

Good to know "macuser".  In past years I've handled questions from users who had made errors that were much easier to find & fix from the forms mode since it highlights errors in pink.

What if neither box is checked

If the 1099R has a number in box 2a AND box 2b is checked (as in downloads from TD Ameritrade) you have to remove the amount in box 2a (make it blank not zero) in order for TT to calculate the correct amount for box 2a.

You enter the 1099-R *exactly* as it is.  If there is an amount in box 2a, then it must be entered.  In most cases, that is the taxable amount.  If there is a "basis" in the account that makes the taxable amount different, the the follow-up questions in TurboTax will handle that situation.

This is a year old post and many changes have taken place in the interview since.

The amount in box 2a is most definitely not correct on my 1099-R, and this page on my broker's site says they commonly do this:  https://www.betterment.com/resources/common-tax-form-questions/#16  

The 1099-R is for excess contributions withdrawn, and boxes 1 and 2a have the same value.  Box 2a should only have the earnings reported on it, which is about 1/10th of the amount withdrawn.  If I enter box 2a exactly as in in Turbo Tax, the only follow up question is if it's a "qualified disaster" deduction.  So it doesn't handle the situation.  

The Betterment advice in the link above is to do form 8606, but when I reach that section in TT, it tells me to OMIT the amounts from the 1099-R section.

The only other option I see is to do a "substitute" 1099-R in TT.  But I'm not sure if that's right.  This situation doesn't seem like it should be so uncommon.  I did the same thing with Vanguard and their form had the right amount in 2a.  Not sure why Betterment couldn't do the calculation.  

CORRECTION: I realized why (I think) the brokerages did this differently.  With Betterment, I had converted the contributions to a Roth from Traditional IRA before I withdrew the excess.  With Vanguard it went straight into a Roth and then was removed.  However, the Traditional IRA contributions I made with Betterment were from already-taxed income before they were converted to a Roth, so removing them should not re-tax them.  I'm just not sure how to indicate this to the IRS without simply changing the amount in box 2a, which you've said not to do.  

Can you help?

---

@balexh wrote:

The amount in box 2a is most definitely not correct on my 1099-R, and this page on my broker's site says they commonly do this:  https://www.betterment.com/resources/common-tax-form-questions/#16  

 

The 1099-R is for excess contributions withdrawn, and boxes 1 and 2a have the same value. 

 

Can you help?

---

What code is in box 7?

In what year did you make the contribution?

In what year was it returned?

Thanks for the reply.

There are in fact two 1099-Rs "removal of excess" from Betterment:

1. 

$1000 contributed in 2018, and withdrawn before the deadline 4/15/2019.   Box 1 and 2a both have $1103

That code is JP.

2. 

$200 contributed in 2019, and withdrawn at the same time as the above $1000.   Box 1 and 2a both have $228.

Code J8.

On both forms "taxable amount not determined" is "yes".

They also sent me a 1099-R (2019) for converting the entire $1311 from Traditional to Roth IRA.  

Thanks again

The 1099-R with JP must be reported on an amend 2018 tax return.

The J8 goes on your 2019 tax return.

You are correct that only the earnings should be in box 2a.   The 1099-R's are also incorrect in another way - it there is a dollar amount in box 2a then the box 2b (not determined) cannot also be checked as those are mutually exclusive.

If the issuer refuses to issue corrected 1099-R's then you can use substitute 1099-Rs (select substitute on the 1099-R Type screen).    The interview will ask for an explanation for the substitute and the steps you took to get the IRA custodian to correct it.

You will need to calculate the earnings yourself if the IRA custodian will not do it for you.

Use worksheet 1-4 in IRS Pub 590A for the earnings.

https://www.irs.gov/publications/p590a#en_US_2019_publink1000230687

---

@balexh wrote:

The amount in box 2a is most definitely not correct on my 1099-R, and this page on my broker's site says they commonly do this:  https://www.betterment.com/resources/common-tax-form-questions/#16  

 

 

---

Personally I would find a new custodian for my IRA.

That link is correct for a REGULAR IRA DISTRIBUTION *not* a return of contribution which is not a regular distribution.

The IRA custodian is required by law to prepare a 1099-R according to the IRS instructions that clearly state:

For a distribution of contributions plus earnings from an IRA before the due date of the return under section 408(d)(4), report the gross distribution in box 1, only the earnings in box 2a, and enter Code 8 or P, whichever is applicable, in box 7. Also, enter Code 1 or 4, if applicable.

https://www.irs.gov/instructions/i1099r

The is not an IRA custodian option.

Thanks so much.

I see that you said that the Betterment link https://www.betterment.com/resources/common-tax-form-questions/#16 is not about "removal of excess" but is about regular IRA distributions.  Just to be sure, did you see that last paragraph that says: "A common error for a customer who makes an after-tax Traditional IRA contribution and converts those funds to a Roth IRA (backdoor Roth IRA contribution) is failing to report the contribution and conversion on Form 8606. If a taxpayer does not file Form 8606, the IRS will likely make a conservative estimate and assume the entire amount of the distribution is taxable (even though that may not actually be true)."

This confuses me because when I do get to the 8606 section in TurboTax, it tells me to omit the excess I withdrew, so it doesn't seem like the 8606 fixes anything.  However, I did do a Traditional => Roth conversion in March 2019 before I withdrew it all as excess contribution.  Does that make this have any relevance to the 8606 form as Betterment says, or do your previous responses still stand and this is a case of either getting them to correct the form or doing a substitute 1099-R myself?  

FYI, I agree and did in fact leave Betterment last year, largely because I didn't want to deal with messy tax issues like this due to their automatic stock trades creating wash sales with other accounts, fractional shares (e.g. 0.0001 share trades), etc.  

Thanks again.

What that article is refering to is a distribution from a Traditional IRA that *does* have the same amount in box 1 and 2a AND the not determined box is checked.   That is because the IRA custodian has no idea if the IRA owner has a non-deductible basis in the IRA (that could be held by a different custodian). For tax purposes you only have one IRA but can have many IRA accounts with different custodians and the basis applies to the aggregate total of all existing IRA accounts (including SEP and SIMPLE IRA's).

Nothing about your code P or 8 1099-R's have anything to do with a "backdoor Roth" whatsoever.

A "Backdoor Roth" is having a non-deductible basis in a Traditional IRA as the only funds in the IRA and then  converting that to a Roth IRA so that the non-deductible contributions offset the tax on the conversion. 

Your 1099-R's indicate that the  money was just returned to you - nothing else.

How is a "Backdoor Roth" involved in  this?

[BTW- since the 1099-R's are messed up - the IRA/SEP/SIMPLE box on the JP and J8 1099-R's is not checked is it?]

=======

This is getting confusing - you originally said:

"However, the Traditional IRA contributions I made with Betterment were from already-taxed income before they were converted to a Roth, so removing them should not re-tax them."

If the money in  the Roth came form a Traditional IRA to Roth IRA *conversion* then  that money cannot be just returned to you from the Roth with a "return of contribution" because a conversion is not a contribution and a conversion  cannot be undone.   It can only be removed with a normal distribution  form the Roth IRA, but the resulting 1099-R would have a code J1 (if under age 59 1/2).

Only a direct money contribution to a Roth IRA can be a "return of contribution" with a code P or 8.

At this point I am not sure exactally what you did. 

I missed the statement:

"However, I did do a Traditional => Roth conversion in March 2019 before I withdrew it all as excess contribution."

Where was the excess contribution?   In the original Traditional IRA prior to conversion?    Why was it excess - did you not have taxable compensation to support the contribution?

Here's the timeline.  All of the following happened within Betterment:

2018 - Opened Traditional IRA account with Betterment; contributed $1000 of regular (taxed) income.

2019 Jan/Feb - $200 more deposits of 2019 regular (taxed) income into the Traditional IRA.

2019 March - converted that Traditional IRA at Betterment to a Roth IRA at Betterment (because I found out that a work retirement account precluded me from deducting contributions to a Traditional IRA, which would have resulted in the contributions being taxed a 2nd time when withdrawing them).

2019 April - worked on my taxes and realized that I ALSO could not contribute to a Roth IRA, due to my filing status/income (married filing separately earning more than $10k).   I used Betterment to "remove excess contribution" before 4/15/2019.  I can't remember if I had to also remove the earnings (around $130) or chose to, but regardless, the whole account was removed.  But I do know for sure that I followed the procedure for removing excess contributions, which is also what is says on the 1099-Rs Betterment gave me:

copy/pasted:

-------------------

2019 Form 1099-R for Roth IRA
Removal of Excess 2019 Contributions
IRS Box Item Value
1 Gross Distribution $227.52
2a Taxable Amount $227.52
2b Taxable Amount Not Determined Yes
2b Total Distribution No
4 Federal Income Tax Withheld $0.00
7 Distribution Code(s) J8
7 IRA/SEP/SIMPLE No
12 State Tax Withheld $0.00
15 Local Tax Withheld $0.00
Box 2a may not be your actual taxable amount since after-tax contributions and outside
accounts can have an impact in determining the taxable portion of your distribution.
Please speak to your tax advisor for assistance in determining if part or all of your distribution is taxable."

"2018 Form 1099-R for Roth IRA
Removal of Excess 2018 Contributions
IRS Box Item Value
1 Gross Distribution $1,103.00
2a Taxable Amount $1,103.00
2b Taxable Amount Not Determined Yes
2b Total Distribution No
4 Federal Income Tax Withheld $0.00
7 Distribution Code(s) JP
7 IRA/SEP/SIMPLE No
12 State Tax Withheld $0.00
15 Local Tax Withheld $0.00
Box 2a may not be your actual taxable amount since after-tax contributions and outside accounts can have an impact in determining the taxable portion of your distribution. Please speak to your tax advisor for assistance in determining if part or all of your distribution is taxable."

2019 Form 1099-R for Traditional IRA
Traditional IRA to Roth IRA conversion
IRS Box Item Value
1 Gross Distribution $1,310.55
2a Taxable Amount $1,310.55
2b Taxable Amount Not Determined Yes
2b Total Distribution Yes
4 Federal Income Tax Withheld $0.00
7 Distribution Code(s) 2
7 IRA/SEP/SIMPLE Yes
12 State Tax Withheld $0.00
15 Local Tax Withheld $0.00
Box 2a may not be your actual taxable amount since after-tax contributions and outside accounts can have an impact in determining the taxable portion of your distribution. Please speak to your tax advisor for assistance in determining if part or all of your distribution is taxable.

------------

Obviously I wasn't familiar with how my filing status, work retirement plan, income, and types of IRA all interacted.

The reason I thought the backdoor Roth paragraph in the Betterment article might be relevant is because I had a similar situation with Vanguard, only their 1099-R reported the correct amount in 2a.  The only difference with Vanguard was that the money went straight from checking account => Roth IRA, whereas in Betterment it went from checking account => Traditional IRA => Roth IRA (all within Betterment), as outlined above.   

So if that all makes sense, I wondered if the advice from Betterment in that paragraph to do form 8606 applied to me since I did that conversion step in March, even though it still seems like I need to do a substitute 1099-R to report the correct amounts in box 2a.  

Very much appreciate the help.  

OK.  You have two questions here so the 2nd one first.   About the 8606.

Your 2018 & 2019 Traditional IRA contributions that  you converted to a Roth IRA...

I am assuming that those contributions were after-tax non-deductible contributions that you did not claim the deduction on.

The 2018 contribution should have been entered on your 2018 tax return in the IRA contribution section as a non-deductible contribution which would have produced a 2018 8606 form with that contribution on line 1,3 and 14.

The 2019 non deductible contribution would be entered into the 2019 tax return the same way.

The 2019 1099-R with the code 2 for the Traditional IRA to Roth conversion is entered into the 1099-R sections and the interview asks what you did with the money - say you moved to to another retirement account and then that it was converted to a Roth.  Continue the interview until it asks if you tracked the non-deductible contributions - say yes.   When it asks for prior year non-deductible contributions enter the 2018 8606 form line 14 value (the 2019 contribution  will automatically be applied).  The enter the total 2019 year end value of all Traditional IRA accounts.  That should produce a 8606 form with the 2019 contribution on line 1 the 2018 on line 2 and calculate the taxable amount on lines 6-18.

This procedure is sometimes called a "back door Roth".  If the year end value is zero then the two non-deductible contributions should offset the tax on the conversion.

============================

The 1st part of the question about the other two 1099-R's....

You said "I realized that I ALSO could not contribute to a Roth IRA, due to my filing status/income (married filing separately earning more than $10k)."

I assume that you did contribute to the Roth and then requested a return of contribution.  So it would seem that the 1099-R's with the code PJ and 8J do report that return except for the errors in the forms as discussed before.  My answer on how to use a substitute 1099-R's still stands.

I was confused by the two totally unrelated events.  Each one must be reported separately.

Your answer is very helpful, and somehow I still have several questions.

I used the standard deduction for 2018 and am doing the same in 2019. 

I checked, and my 2018 return has no 8606 form, although I did use TurboTax to report the 2018 IRA contributions. I even remember going through that section with a Turbotax Live Help person.  I think that I never indicated that I tracked non-deductible contributions when I did my 2018 return.  If I try to for 2019, it says that if I never filed 8606 last year, I should just enter zero for the basis on Dec 31 2018.  The result is it just says there is zero IRA deduction, which I would have expected.  I take it this section should not affect my taxes owed, given that all contributions from all accounts have been removed?

When I look under the deductions and credits section, it has this:

Traditional and Roth IRA Contributions: 2018: $5,500.00           2019: $0

I know that the 2018 $5500 includes:
1) $4500 that was contributed to a Vanguard Roth IRA in early 2019, but as a 2018 contribution. All of that was removed as excess before 4/15/19.
2) The $1000 that was contributed to the Traditional IRA in Betterment, deposited in 2018 for the 2018 year. It was the same $1000 that was later recharacterized to a Roth in March 2019 and then removed before 4/15/19.
Is the fact that all $5500 was removed be the reason that Turbotax didn't generate an 8606? Or did I mess something up last year?

I also just went through the 2019 IRA contribution interview and included the $200 IRA contribution and then removal, and it lists the above $0 figure. So I'm not sure why the $5500 is listed for 2018 but the $200 isn't for 2019.  All of it both years was removed.  

Finally, I looked at my Vanguard 1099-R and I'm confused why it has code 8J and not PJ. I logged into my Vanguard account and confirmed that, while the money was put in the account in 2019, it clearly states that it was a 2018 year contribution. Is it a code 8 because the earnings were accrued in 2019?  

Vanguard 1099-R only values are:

Box: value:
1       4,503.06
2a     3.06
4        0.00
7        8J
12      0.00

Sorry if this is too many questions in one thread or if it's getting too complex or has deviated too much from the topic. Just let me know if so. Thanks.

1) The $4,500 2018 contribution mace *in* 2019 *for* 2018 and returned in 2019 is taxable in 2019 since it is taxable in the year made and returned, not the year that it was for, so the code 8J is correct and the $3.06 would be taxable in your 2019 tax return.   Since that money was return to you then it is not longer in any IRA account.

2) If you also contributed $1,000 to a Traditional IRA in 2018 and recharactorized that to a Roth then in 2018 it should have been entered as a Traditional IRA contribution and answer yes to the question "did you switch the Traditional IRA contribution to a Roth IRA" which is a recharacterization.   That is the same as never contributing to the Trad IRA in the first place and the contribution was to the Roth.

That explains the 1099-R code JP for $1,103.   Box 2a should have been only $103 which is the earnings.

"Is the fact that all $5500 was removed be the reason that Turbotax didn't generate an 8606? Or did I mess something up last year?"

Yes.   Contributions removed should not be on a 8606.

"So I'm not sure why the $5500 is listed for 2018 but the $200 isn't for 2019. All of it both years was removed."

You probably entered the $5,000 in 2018 as a Roth contribution and did not go back and delete it after it was removed.  Roth contributions do not go on your tax return at all but it might have also added a 8880 (savers credit) that you were not entitled to if the contribution was later removed.  Check the 2018 return to see if the $5,000 Roth contribution gave or added to the savers credit - if it did you will need to amend 2018 and delete it and probably owe additional tax.

If the $200 is a 2019 contribution for 2019 and it was removed then either do not enter it as a new 2019 contribution or return to the IRA contribution section and delete it.   If removed, it will not be listed.

Ok I think I'm clear now.  The only thing I am not sure of is why the $5500 shows up on the turbotax user interface for 2018, but I checked my 2018 return and there is no 8880, and the line on schedule 3 "retirement savings contribution credit. attach form 8880" is blank.  All lines that reference "IRA" are blank.  The only place I see anything about IRA is a short page called "Additional information from your 2018 Federal Tax Return" where there is a recharacterization explanation I wrote for the $1000 that was put into Betterment in 2018.  So it seems fine.

Thanks for your help clarifying all this!!

In the scenario. With boxes filled 2a filled out I get prompted questions that seem like they would help determine taxable amount but aren't necessary as the amount is on the form. However, in scenario with 2b checked, TT doesn't ask the relevant questions and just includes the full amount as taxable. How do we fixes this and put the correct taxable amount in? 

To clarify, what type of pension or income is the second 1099R?