Withdrew excess contrib from Roth IRA funded from savings. 1099-R form I have shows box 1 and 2a the same. I should not be taxed on what I paid to put in. Do I need 8606?

[Rainman12]

What's in Box 7 of the 1099-R? When did you make the excess contribution? When were the funds returned to you?

[macuser_22]

In addition to the code in box 7, is the IRA/SEP/SIMPLE box checked on your 1099-R form?

[kerbob]

Box 7: J8. IRA/SEP/SIMPLE: NO

[kerbob]

I put 5500 from my savings in Jan 2018. Withdrew it in Dec of same year when I realized I was not eligible due to income. I withdrew 5395.17 (it lost money during the year). Both Box 1 and 2a say 5385.17. Betterment says they won't fix because they don't know how I funded the account.

[macuser_22]

A 2018 1099-R with a code J8 indicates a return of contribution taxable in 2018.   The amount returned plus any earnings should be in box 1.    The taxable earnings in box 2a.  Only the earnings in box 2a are taxable.

If the box 2a is including the contribution and earnings then the 1099-R is incorrect and you should contact the payer for a corrected 1099-R.

[macuser_22]

Refer the payer to the 1099-R instructions:
<a rel="nofollow" target="_blank" href="https://www.irs.gov/instructions/i1099r">https://www.irs.gov/instructions/i1099r</a>


[Quote]
"Roth IRA.

For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case of an IRA revocation or account closure and a recharacterization, earlier. Use Code J, Q, or T as appropriate in box 7. Use Code 8 or P, if applicable, in box 7 with Code J. Do not combine Code Q or T with any other codes.

****However, for the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and *only the earnings* in box 2a. Enter Code J and Code 8 or P in box 7.****"
[end quote ]

[kerbob]

Betterment is the payer. According to their web site:
"We cannot make changes to Box 2a of the 1099-R. It is the customer’s responsibility to determine the appropriate taxable portion when filing their tax return by completing the Form 8606." That's why I was thinking I need an 8606. However.. reading 8606 instructions, it seems like I shouldn't even have to do this. I realized my error before the end of the tax year and corrected it AND I took a loss.

[macuser_22 · Accepted solution]

A 8606 form has *nothing* to do with a Roth excess contribution and is not filed.

I would find a new provider since "Betterment" does not know what they are talking about and the IRS regulations.

If you actually had a loss and no earnings then:

Ignore the 1099-R and use the bottom 1099-R form type "Substitute 1099-R" (4852 form).  Enter the same thing as the 1099-R you received but make box 2a equal to the earnings (zero of a loss).   Enter an explanation statement and what yiun did to get the payer to correct the wrong 1099-R as you explained above and let the IRS deal with "Betterment".

[Rainman12]

I upgraded macuser_22 comment to an answer because, IME, it is the Only plausible, justifiable solution. I've Never seen a custodian admit they've made a mistake, and this apparently is one. A refusal to check the 'taxable amount not determined' block was unjustified under described circumstances.

[kerbob]

Thanks for the great support! Very helpful!

[dmulchand]

Hi - I'm unfortunately affected by this exact same issue with Betterment. I withdrew excess ROTH IRA contributions and box 1 and 2a are the same -- 2a should be $0 (I did not gain or lose my original contribution). How do you file a return including the form 4852 on Turbotax? If I can't do it online, I've never mailed my return before. Will it take a really long time to get my refund? 

Thanks -- and I'm really pissed off that Betterment won't correct the 1099-R.

[macuser_22]

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@dmulchand wrote:

Hi - I'm unfortunately affected by this exact same issue with Betterment. I withdrew excess ROTH IRA contributions and box 1 and 2a are the same -- 2a should be $0 (I did not gain or lose my original contribution). How do you file a return including the form 4852 on Turbotax? If I can't do it online, I've never mailed my return before. Will it take a really long time to get my refund? 

Thanks -- and I'm really pissed off that Betterment won't correct the 1099-R.

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What code is in box 7?