Early distribution exceptions for ROTH IRA not on my 1099-R. The distribution was 7 years after the last contribution. 1099 has "J" and taxable amount not det box is x'd

[pepbrow]

early distribution exceptions for ROTH IRA not on my 1099-R. The distribution was 7 years after the last contribution. 1099 has "J" and taxable amount not determined box is checked.

When I enter the information as it is in the 1099-R, my refund drops by more than $1600.00. It's a Fidelity Destiny II-0 plan. The institution that provided the 1099 was UMB BANK NA. It appears they are seriously under/not trained properly. My wife called them no less than 5 times, and only one of them actually gave an useful info, the others simply said "talk to a CPA", but when the transaction was in progress, they told my wife that there would be not penalties (because of the timing exception) and shouldn't be any tax, as it is from a ROTH IRA, but they didn't provide an exception code on the 1099-R. The distribution code is "J" and "taxable amount not determined" box is checked.

How do I deal with this in TurboTax Premier?

[macuser_22]

I removed your attachments since they contained personal information.

[dmertz]

Since you are apparently under age 59½, the Form 1099-R is correct.  The bank is also correct in stating that it is your own responsibility to determine the taxable amount of the distribution (with TurboTax's help).  It's impossible for any Roth IRA custodian to determine the taxable amount of this distribution because it depends on information that they have no way of knowing.

Enter the Form 1099-R as received and answer the follow-up questions.  Click the Continue button on the Your 1099-R Entries page, then answer the additional questions regarding your basis in Roth IRA contributions and Roth conversions.  TurboTax will then prepare the required Form 8606 Part III to calculate the taxable amount of this nonqualified distribution.

[pepbrow]

Thank you. You are correct about my wife's age. I understand that "J" is correct, but there should have been a 2nd code to take care of the 5 year exception. I did the same thing (another company) with an IRA, my code was "2". TurboTax didn't need any other explanation.

I will do as you suggest and see how it works out. Thanks again.

[macuser_22]

No, their should not be a second code.   Code J cannot have any other code if not a return of contribution.  You answer the 5 year question in the interview.  Code 2 is used when the payer knows that there is an exception to the 10% early distribution penalty.   Code J means that you are under age 59 1/2 and the payer does not know if you have an exception - the interview also asks for that.

[dmertz]

Since your wife is under age 59½, having had a Roth IRA for 5 years is irrelevant unless the distribution was used for a first-home purchase or your wife is disabled.

[pepbrow]

My wife knew there was an exception before she withdrew as well. As a matter of fact they told here how much she could withdraw without incurring a penalty.

They Bank actually verified the exception before the transaction, so that isn't the question.

Knowing there was a valid exception, why didn't they put that in the 1099-R.

No matter, I'll deal with it in Turbo Tax. We will be on the look out next time.

[dmertz]

Any statement that a particular Roth IRA custodian might make about the taxability of an early Roth IRA distribution depends on unsubstantiated information provided to the custodian by the participant.  Because it is impossible for the custodian to substantiate the information provided by the participant, the custodian is required to report early-distributions from a Roth IRA using code J.  It's entirely the responsibility of the participant to provide proper reporting on Forms 8606 and 5329 to show to the IRS the amount of the early distribution that is subject to tax and penalty.