Roth 401K

[Rmock3]

I am 66 years old and retired.  I withdrew/closed out my Disney Roth 401K account.  Do I owe taxes on the amount I received. I thought Roth 401K money was tax free.

[Bsch4477]

• Contributions and earnings in a Roth 401(k) can be withdrawn without paying taxes and penalties if the account owner at least 59½ and has held their Roth 401(k) account for at least five years.

[SusanY1 · Accepted solution]

You should not owe taxes on the income withdrawn from your Roth IRA as long as it has also been at least 5 years since your first contribution to the account

.

For a Roth IRA or Roth 401(k) withdrawal to be entirely tax-free you must be over the age of 59 1/2 and meet the 5-year holding requirement. 

Even if your Roth IRA distribution is tax-free, you should enter the information provided on your 1099-R into TurboTax.  The code in Box 7 of form 1099-R will tell TurboTax how to treat the income.  

Qualified Roth IRA/401(k) distributions will have code "Q" in Box 7 of Form 1099-R.

[Rmock3]

I have had the Roth 401K for 6 years.  When I add the 1099R info into turbo tax, it indicates the money was taxed

[Rmock3]

Block 7 code is a "B" , not a  "Q".

[SusanY1 · Accepted solution]

Does your 1099-R have "Q" in Box 7? If your form is marked this way, double-check that it is also entered this way in TurboTax.  

Then, follow these steps to verify if the income is being reported as non-taxable on your tax return:

1. Login to your TurboTax account at TurboTax.com.
2. Click on Tools in the menu on the left-hand side of the screen (Note: if you do not see Tools first click on Continue where I left off or Take me to my return).
3. Click on Tax Tools.
4. Click on Tools.
5. In the menu that pops up, click on View Tax Summary.
6. With the summary on the screen, click on Preview My 1040, in the left menu panel.
7. Scroll down to review the tax form.  Check to see if the Roth distribution is included on line 4d as taxable.  If the income is being treated properly you will see the distribution amount on line 4c, but it will not be included in the amount on line 4d.

[Bsch4477 · Accepted solution]

That code is a designated Roth withdrawal. 

Unlike pre-tax elective deferrals, the amount employees contribute to a designated Roth account is includible in gross income. However, distributions from the account are generally tax-free, including previously untaxed earnings in the account.

[macuser_22]

A Roth 401(k) (designated Roth) will never have a Q in box 7.   Code "Q" is for a qualified distribution from a Roth *IRA* only.   A 401(k) Roth distribution will have a code "B" or if a rollover to a Roth IRA, a code "H" in box 7.

See the 1099-R box 7 rules:

https://www.irs.gov/instructions/i1099r#idm140345395742352

[Bsch4477]

@macuser_22  Should the program exclude amounts with code B from tax?  From what I read it should, but I have no personal experience with this issue.  Apparently the OP is being taxed on that distribution. 

[Bsch4477]

I think I solved your problem. Enter the date you started the Roth in box 11 of your 1099-R and you will not be taxed on your distribution. 

[SusanY1 · Accepted solution]

Code B should also make the Roth distribution non-taxable.  If it is showing as taxable income on line 4d, please also check one more entry. 

Please navigate back to the 1099-R as explained above and make sure that there is not a dollar amount (other than 0) in Box 2a as well.  

[Rmock3]

Good morning,

Thank you for all your advice.  The problem has been corrected. There was a Turbo Tax program update yesterday and after I installed it, the problem went away.

[dmertz]

There was a bug in 2019 TurboTax that was causing duplication of certain taxable amounts on Form 1040 line 4d, usually triggered by a code H Form 1099-R also being present which was not the first Form 1099-R entered.  This bug was corrected in release R14.

Correcting certain inaccurate information provided in earlier posts in this thread, code B does NOT itself imply a nontaxable distribution.  Box 2a can indeed have a nonzero taxable amount properly shown in box 2a of a code B Form 1099-R.  A distribution from a Roth 401(k) is only nontaxable if the amount in the account is less than what was original contributed to the account (basis greater that or equal to the account balance) or if the distribution is a qualified distribution because the recipient of the distribution is over age 59½ (or qualifies as disabled) and the distribution occurred at least 5 years after the beginning of the year that the designated Roth account was established.

Unlike a distribution from a Roth IRA, there is no box-7 code to indicate a qualified distribution from a Roth 401(k).  A qualified distribution is indicated by the code B Form 1099-R not being accompanied by code 1 or code 2 in box 7 showing in box 11 a year of first designated Roth contribution more than 5 years prior to the year of the Form 1099-R.

[Rmock3]

Thank you.  That was my problem. Since I updated the program yesterday the issue with my 401K went away.

[BP61]

1099-R has a taxable amount box 2a. 

It is a dividend distribution from a Roth 401K

It was a qualified distribution over 59.5 yrs old and the roth account is 9 yrs old

Box 7 code UB

why would this be taxable?