Roth Distribution Attributable to Being Disabled--Erroneous 1099-R Code J

[rtvanhook]

Issue is about reportable income from earnings.  Not the 10% penalty.

Roth IRA distribution are considered qualified if "attributable to the individual’s being disabled", subject to the 5 year exclusion period.

So amount should not be included on line 19 of 8606 ("total nonqualified distributions").

But Vanguard doesn't know of the disability, and reported code J on the 1099-R.

And TurboTax includes the amount on line 19 of form 8606.

Am I missing something in Turbo Tax, or do I need to try to get Vanguard to amend the code?  I question whether they'll do that, because disability determination isn't exactly the bank's responsibility.

TurboTax handles the penalty exception.  That's not my issue.

[dmertz · Accepted solution]

If you are using the CD/download version of TurboTax, you can handle this in forms mode.  In forms mode you'll need to mark the box on TurboTax's 1099-R form to indicate that the distribution is qualified despite the Form 1099-R having code J or code T.

If you are using the online version of TurboTax and there is no tax withholding shown on the Form 1099-R, enter code T in box 7 instead of code J.  Because there is no tax withholding, TurboTax will not include the details of the Form 1099-R with your e-filed tax return so your substitution of code T for code J will not be apparent in your filing.

Regardless of which method you use, if you have not previously filed anything with the IRS claiming a disability exception, you'll need to provide the IRS with documentation, generally from a doctor, supporting the claim of disability, so you'll likely need to print and mail your tax return anyway.  Even if you have already provided the disability information to the IRS, you still might want to print and mail so that you can include an explanation for the code-J distribution not being present on Form 8606.