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?

[gadakolios]

This is for a distribution from a monthly pension. 

[MartyDC · Accepted solution]

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. 

[MartyDC]

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.

[macuser_22]

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.

[gadakolios]

Thanks, appreciate the help and quick responses.

[MartyDC]

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.

[p112p873]

What if neither box is checked

[Andrew31]

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.

[macuser_22]

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.

[balexh]

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?

[macuser_22]

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@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?

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What code is in box 7?

In what year did you make the contribution?

In what year was it returned?

[balexh]

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

[macuser_22]

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

Enter the code JP as follows in an amended 2018 tax return:

You would enter the substitute 1099-R with the total distribution in box 1 (the contribution plus the earnings),

The earnings in box 2a,

Enter code "P" in box 7 (Top) - don t worry that it will say "taxable in 2017 "

Enter code "J" in box 7 (Bottom).

On the "Which year" screen say that this is a 2019 1099-R. - That makes it taxable in 2018 and not 2017

After the 1099-R summary screen press continue.

If you are over 59 1/2 then on the "Lets see if we can lower your tax bill" enter the box 2a amount in the "Another Reason" box to eliminate the 10% early withdrawal penalty on the earnings.

The box 2a earnings will be taxable income reported on line 4b on the 1040 form and if under age 59 1/2 will also be subject to a 10% penalty on a 5329 form that will be reported on line 59 on the 1040 Schedule 4 form.

[macuser_22]

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@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  

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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.

[balexh]

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.