Roth IRA 1099r - Withdrawal of contribution is being taxed ! Vanguard won't reissue a new 1099r

[Gonzis]

Hi everyone,

In September 2020, I contributed $6000.00 to my ROTH ira, then in the same month i withdrew $6000.05.

I received a 1099r with a checkbox under (2b) marked as:Taxable amount not determined.

2A is blank.

Tax code for distribution is J.

When I'm doing taxes and putting everything exactly as on the 1099r, I'm being taxed on all $6000.05 when in fact it should only be $.05 that is taxable.

Vanguard says that this is how they issue the 1099r to everyone and would not correct it.

Any help ?

[MarilynG1]

You don't mention if you have had your Roth IRA for over five years.  Generally a distribution will be Earnings before Basis, with Earnings being taxable.  

Click this link for more info on Roth Early Withdrawals. 

[dmertz]

The Form 1099-R provided by Vanguard is correct and they are correct to refuse to change it.

You must enter the Roth IRA contribution to establish your contribution basis before TurboTax can properly prepare Form 8606 Part III that none of the distribution is taxable when rounded to the nearest dollar.

Your age does not matter.  How long you've had a Roth IRA does not matter.

[Gonzis]

I think age is irrelevant when I'm withdrawing the money i contributed.

[Gonzis]

And where do i enter my roth contribution on turbotax online?

I've had CPAs from Turbotax assist me with the issue and none were able to do it the right way.

[dmertz]

You must enter your $6,000 Roth IRA contribution for 2020 under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions.  TurboTax will automatically add this amount to your contribution basis.

To enter any contribution basis from years prior to 2020, click the Continue button on the Your 1099-R Entries page to reach the questions about your Roth IRA contribution and conversion basis.

[dmertz]

I've edited and added to my previous reply.

Were you eligible to make this Roth IRA contribution for 2020 or was this an excess contribution?

Is this the only money you had in Roth IRAs?

[Gonzis]

I'm going to give it a try. If  it's that simple then Turbotax needs to refund me the money for paying for CPA help when they couldn't figure it out.

"Were you eligible to make this Roth IRA contribution for 2020 or was this an excess contribution?

Is this the only money you had in Roth IRAs?"

Yes, this was my first time contributing, so i did the maximum. This is my only Roth IRA ever opened in 2020.

[dmertz]

Then yes, entering the $6,000 Roth IRA contribution that you made for 2020 and entering the code J Form 2020 1099-R reporting the $6,000.05 distribution will result TurboTax preparing Form 8606 Part III to show that the distribution is not taxable.

Note that this does not necessarily mean that your refund or balance due will remain unchanged by the combination of these two transactions.  If you are married and your spouse made a retirement contribution for 2020 that would otherwise be eligible for a Retirement Savings Contributions Credit, your Roth IRA distribution can reduce your spouse's eligibility for the credit.  But if you are unmarried or your spouse did not otherwise qualify for this tax credit, the taxable result upon entering these two transactions should be the same as if you entered neither of these transactions.

[Gonzis]

You were absolutely right.

One more question remains, in the NJ return I'm asked this: I want to make sure that I am not reporting the roth ira contributions twice. I've already done it the way you suggested it.

Q:Tell us if this was the first withdrawal from this IRA:

A:Yes, this was the first year of withdrawal from this IRA. (i checked  this options)

Then next options are

Question:Total of IRA Contributions Previously Taxed:I think 6000$ is the right answer.

Answer: 6000$ ( if i enter 6000$ my tax due decreases by 200$.

If i put 0, in addition to tax due increasing by 200$,  in the next screen I get this "Total New Jersey taxable pensions$6,000" - since this is a roth ira withdrawal of my original contribution , shouldn't it be 0 ?)

Q:Value of all IRA's on 12/31/2020

A:0

Q:IRA contributions made for 2020 between 1/1/2021 and 4/15/2021 

A:0

Contributions previously taxed include:

 - Contributions made to an IRA while you were a resident of New Jersey

 - Contributions that did not reduce the income on your federal return in the year they were made

 - Contributions that did not reduce state income in another state

[dmertz · Accepted solution]

I'm not familiar with TurboTax's questions for preparing a NJ tax return, but Yes, the $6,000 contributed to the Roth IRA is money that was previously taxed.

[Gonzis]

Hi Dmertz,

Thank you again for your helpful responses. Turbotax agents were unable to assist me over the phone.

Do you think it's okay that is being reported under NJ state and under Deductions and Credits ?

Also, quick question. I used my vehicle for Doordash in 2020 for about a month and then stopped.

Q: When did John start using this vehicle for your work?

Answer: 01/01/2020

Checkbox: John stopped using this vehicle in 2020 - If i mark it i get the following too.

Tell us when they sold, traded-in, gave away or stopped using this vehicle for your work.

If i mark the above check box, then in the next pages I get a questions: if i converted the vehicle to personal use,  depreciation and market value, sale, etc. If i left it unmarked, those questions are gone.

Is it ok to leave it blank in this case since it's my personal vehicle and not using it for Doordash work anymore.

I took the standard mileage deduction.

Thank you so much again !

@dmertz 

[dmertz]

Your most recent questions are outside my area of experience.

[Nswain1110]

The way you enter your 2021 Roth Contributions to establish your basis for not being taxed is collected when wrapping up the "IRA, 401(k), Pension Plan Withdrawals (1099-R)" section under "wages & Income". It's not very obvious in my opinion. 

I ran into this same issue - I put in  my 1099-R and my refund went WAY down. I spent an hour trying to figure out where to enter my 2021 Roth contributions. Finally decided to wrap up that section and come back later, and discovered that Turbo Tax collects your contribution amount as part of the final wrap up questions for that section. My tax liability was corrected upon entering the amount.