Reporting 1099R

[ptag4951]

I opened an IRA in march of 2019.I withdrew the money 4 months later to put into an brokerage account . 

i never deducted the IRA on any tax return. I had assumed that since i put it into a brokerage account i would not have to pay taxes on it . I received a 1099 showing all of the amount as taxable income in addition to being charged a penalty had a code 1 in box 7. Is this right or do i have to pay taxes and penalty on amount

[macuser_22]

You make a mistake.   Your 1099-R is reporting it as a normal taxable distribution.    The 10% early distribution penalty will apply.     You should have simply requested "a return of contribution" which you can do up to the due date (April 15) of the return or up to the extended due date (Oct 15) if you file a timely extension.   That would be totally tax and penalty free.  The 1099-R would then have a code 8 in box 7.     The IRA trustee should have informed you of that - you shoukd talk to them.   I have seen a couple of trustees that will issue a corrected 1099-R.

You need to enter the contribution in the IRA contribution sections and check the box that say that you wan it all to be non-deductible.

When you enter the 1099-R  and you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions.

You will be asked of you had and tracked non-deductible contributions - say yes. The enter the amount from the last filed 8606 form line 14 if it did not transfer. Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.

That should help to offset the taxable amount, but not the 10% penalty.