Roth distribution

[monkeyfi]

I  took a distribution in 2016 from my Roth account which was held by Fidelity Investments. Form 1099-R had T in block 7-distribution code. The Roth account was original setup with Vanguard in 2007 when I was 65. Proceeds were transferred from a traditional IRA. I transferred the account in the entirety to Fidelity in 2013. According to Fidelity withdrawals are taxable unless held for 5 years and the amount I took out was a taxable.  Fidelity states they cannot change the 1099-R. I am still working on my 2016 1040 but need to know how to handle this distribution since it should not be taxable.

[SweetieJean]

T—Roth IRA distribution, exception applies.

[Carl]

Fidelity is correct in that they can not change the 1099-R because it is not wrong "from their perspective". Fedelity held the money in a ROTH for less than 5 years. How long it was held in a ROTH by the predecessor doesn't matter (to Fedelity).  But it does matter to you.
If you will enter the 1099-R exactly as printed it will all work out. After entering it, continue working through the program and pay attention to the small print on each screen as you work it through, so you don't mistakenly answer NO where you should answer YES (or vice-versa). Once the program "knows" this money was in a ROTH for more than 5 years (counting back 1826 days from the date of withdrawal) it's taxability should be "cancelled out" if you've made the correct selections on each screen following the initial 1099-R entry screen.

[macuser_22 · Accepted solution]

Carl is correct.  A "T" and a "Q" (Qualified distribution) are the same except the payer does not know if you have had a Roth IRA for 5 years.   Since you did, simply answer "yes" to the 5 year question in TurboTax and it will be handled exactly as if it was a "Q".

[CP06]

I withdraw 10K from my ROTH IRA from Fidelity last year after I passed 59 1/2 years old.  My code in box 7 is "T".  My Roth was set up more than 10 years ago so I met all the required for a tax free distribution.  However, TURBO TAX kept calculated the tax on this 10K even after I carefully check all the boxes correctly.  My question-DO I NEED TO WAIT TILL THE END OF THE PROGRAM TO SEE IF TURBO TAX RECOGNIZE THAT THIS IS A TAX FREE TRANSACTION OR DO I NEED TO DO SOMETHING ELSE AT THIS TIME TO CORRECT MY INPUT.  Please help as this is my first time purchasing this software and I am frustrated in using it.  

[dmertz]

To cause TurboTax to treat a code T distribution as a nontaxable qualified distribution You must click the Continue button on the Your 1099-R Entries page and answer Yes when 2019 TurboTax asks if you had a Roth IRA before 2015.  If you instead answer No, TurboTax will require you to enter your basis in Roth IRA contributions and conversions to be able to prepare Form 8606 Part III to calculate the taxable amount of the distribution.  If you have not yet answered this question TurboTax will by default treat the distribution as a qualified distribution but will treat the lack of an answer to this question as an error on your tax return that must be corrected before e-filing.  If TurboTax is truly treating this distribution as taxable, it implies that you previously answered this question indicating that you did not have a Roth IRA before 2015.

[CP06]

Super,

I am grateful for your quick assistance.  I did not get a question asking me if I had a ROTH account before 2015.  How do I go about to get this question answer.  I had gone back and walk thru the steps one more time and got the same old questions but not the question if my Roth is before 2015.  Please direct me to the right place.  Again, many thanks.  CP.

[dmertz]

As I said, click the Continue button on the Your 1099-R Entries page to reach this question.  The Your 1099-R Entries page is reached by going to Wages & Income (or Personal Income) -> Retirement Plans and Social Security -> IRA, 401(k), Pension Plan Withdrawals (1099-R).

[CP06]

Super,

I deleted and re-enter my form 1099-R and did get the question.  Upon answering yes to the question that my Roth is more than 5 years old (prior to 2015); I still get the same result and the system is telling me that I  still have to pay tax on this distribution.  What can I do at this point?  Please advise.

[dmertz]

I don't see how it's possible that this would be treated as taxable.

1. Have you entered any other Forms 1099-R?
2. Have you left box 2a empty on TurboTax's 1099-R form (as it should be on the Form 1099-R provided by the payer?
3. Are you seeing the entry of this code T Form 1099-R increasing the amount present on Form 1040 line 4b?
4. Or are you just looking at the refund display where the refund amount could be lowered by a side effect of distribution from the Roth IRA such as reducing or eliminating a Retirement Savings Contributions Credit that you might otherwise be eligible to receive?

[CP06]

Super,

 I went to Form 1040 and look at line 4b and there is zero tax calculated so your advice to check the answer that my Roth is more than 5 years old worked.  This is a great community and I am grateful to be part of it.  Again, many thanks for your commitment to assist newbie to TurboTax such as myself.