Roth IRA withdrawal, 1099-R, believe it is inaccurate because withdrawal amount not even close to contributions made to Roth IRA account

[Brandon3]

I made a withdrawal from my Roth IRA this year amounting to a few thousand dollars. I have, however, contributed well over ten thousand to this Roth IRA account. I believe this withdrawal is not taxable because it doesn't exceed my original contributions. Please advise.

[Carl]

What precisely, is it that you believe may be inaccurate? IS there an amount in box 2? What's the code in box 7?

[Brandon3]

The code in box 7 is J. There is no amount in box 2 and "taxable amount not determined" is checked.

[Carl]

Right now, the program doesn't "Know" about your contributions, because you've not entered them yet. (I am assuming this). But even so, I "think" at a minimum your early withdrawal is subject to a penalty . @VolvoGirl is that right? If the IRA/SEP/SIMPLE box is checked, then I think that alone makes it a "penalty" withdrawal too.
But in my test scenarios, If the IRA/SEP/SIMPLE box was checked, "and" I indicated on a later screen it was deposited into an HSA, then none of it was taxable.

[Brandon3]

The IRA/SEP/SIMPLE box was NOT checked, nor was it marked on the 1099-R form.

[Brandon3]

I think my question is simpler than this. If you make, for example, $5,000 contributions to a Roth IRA for four years, and then withdraw $1,000 randomly, you get taxed on that?

[Carl]

If it's an early withdrawal, yes. Per the code "J" in box 7, it's an early withdrawal. I've ran several test scenarios myself, and I just can't get it to duplicate your situation. I assume you are under the age of 59 1/2 same as I am.

[Brandon3]

Yes, under the age of 59 1/2. I'm just not sure how I can get taxed on this money. They aren't capital gains. It is after-tax money. This ultimately makes no sense. Imagine the same situation in a brokerage account. There would not be taxes.

[Brandon3]

I think this link answers my question: <a rel="nofollow" target="_blank" href="http://www.rothira.com/blog/roth-ira-withdrawals-when-youve-lost-money">http://www.rothira.com/blog/...>

Do you agree with this? This is the scenario I'm trying to describe, and I think my financial institution just wasn't able to identify my situation for some reason.

[Carl]

From what I see, and I only perused it without studying it that close, it would "appear" that box 2 should show the taxable amount of earnings withdrawn early, which would be taxed and penalized in your case. But if you had losses, then nothing should be taxable. I suspect that 1099-R is wrong. But only someone better versed in this stuff would be able to tell you that definitively From what I've read and the way I'm interpreting it, sounds to me like box 2 should have a big fat ZERO in it.
What I suggest only as a test, is that you enter a zero in that box and see what happens. My bet is, (and only the issuer of the 1099-R can confirm it and issue you a corrected 1099-R) is that box two is supposed to have a zero in it.
perhaps whoever prepared the 1099-R just didn't realize (for whatever reason ) that this is a ROTH? Can't see how they couldn't realize it through, since the description for box 7 code J clearly has the word ROTH in it, in all capital letters.
Most likely, we're "both" missing something here and the withdrawal is taxable. @TaxGuyBill you more up to snuff on this stuff than I am? I hope so..

[Brandon3]

If I go ahead and submit my taxes without getting this figured out, will that be a problem? I have no reason to believe I have taxes to pay on this withdrawal.

[Carl]

If you knowingly submit an incorrect tax return, and a future correction would result in you owing money to the IRS (such as a return of some of your tax refund) then you will pay penalties and interest. That interest can add up too, because it can take the IRS as long as 24-36 months to actually catch the error.
Generally, if the error is in your favor resulting in additional refund, you'll never hear from the IRS. (It happens, but it's rare). It would be up to you to file an amended return within 3 years to get any additional monies refunded to you. After 3 years, you lose it permanently.
In other words, lets wait for others to respond and get it right the first time. 🙂

[dmertz]

You must click the Continue button on the Your 1099-R Entries page and proceed to where TurboTax asks you to enter the amount of your contributions made for years before 2016 (minus any distributions made before 2016) and asks for the amounts of Roth conversions made before 2016.

Also make sure that you have entered your current year Roth IRA contribution under Deductions & Credits.

TurboTax will prepare From 8606 Part III to calculate the taxable amount of your distribution.  If the distribution is less than your net contribution basis, the distribution will be tax and penalty free.

[Brandon3]

Thank you, I believe this answer is 100% what I was looking for. The only problem is that I've submitted my return already.

In this case, should my return be accepted by the IRS (which I expect still), should I submit an amended filing with the 1099-R information?

[dmertz]

If you submitted your tax return without entering this Form 1099-R, you'll eventually get a notice of tax deficiency.  Without Form 8606 Part III included with your tax return to show that none of the amount distributed is taxable, the IRS will consider the entire gross amount of the distribution to be subject to tax and early-distribution penalty and will send you a bill.  You should be able to head that off by amending your tax return.  You'll generally want to wait to amend until your original tax return has been processed and any refund due has been received.