Withdrawal of Roth IRA contribution in same year counted as a distrubtion

[elliotts]

In 2021 we contributed $6,000 to a ROTH IRA. This was a mistake and about a week later we withdrew the money. I have a statement from the vendor that shows, in the same month, $6,000 in contributions and $6,000 in distributions. However, we ended up getting a 1099-R in 2021 that shows a $6,000 gross distribution with distribution code J ("Early distribution from a Roth IRA, no known exception (in most cases, under age 59 ½)").

This situation doesn't seem to be in the common list of exceptions for ROTH withdrawals. Are we really stuck paying the penalty on this?

Thanks.

[macuser_22 · Accepted solution]

---

@elliotts wrote:

In 2021 we contributed $6,000 to a ROTH IRA. This was a mistake and about a week later we withdrew the money. I have a statement from the vendor that shows, in the same month, $6,000 in contributions and $6,000 in distributions. However, we ended up getting a 1099-R in 2021 that shows a $6,000 gross distribution with distribution code J ("Early distribution from a Roth IRA, no known exception (in most cases, under age 59 ½)").

This situation doesn't seem to be in the common list of exceptions for ROTH withdrawals. Are we really stuck paying the penalty on this?

Thanks.

---

No.   But you should have have just asked for a "Return of contribution" that would have a code 8J in box 1 and any earnings would have also been returned.   A code J by itself is a normal distribution but the contribution amount is not taxable.

You can always withdraw your own Roth contributions tax and penalty free.

When entering the 1099-R --
One of the followup questions will ask for your prior year** contributions not previously withdrawn. Those contributions that still remain in the Roth will not be taxed or subject to a early withdrawal penalty. That will add a 8606 form to your tax return with the Roth contribution and tax calculation in part III.

Note: **Prior year - any current year Roth contributions should be entered into the IRA contributions section. They will not show up in the prior years contributions but will be accounted for on the 8606 form that calculates the taxable amount.

[elliotts]

Just to be clear, form 8606 is for the taxable gains made on contributions (if any) prior to their return? So if we made the contribution, did not invest the money in anything, and returned the same amount, there would be no gain?

Thanks.

[macuser_22]

Even if the overall IRA had a gain, if you did not withdraw it then there is no taxable gain.