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

Forum|Forum|7 years ago
June 1, 2019
12 replies
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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.

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Carl

Level 11

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

Brandon3Author

Level 2

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

Carl

Level 11

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.

Brandon3Author

Level 2

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

Brandon3Author

Level 2

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

Level 11

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.

Brandon3Author

Level 2

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.

Brandon3Author

Level 2

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/roth-ira-withdrawals-when-youve-lost-money</a>

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.

Brandon3Author

Level 2

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

Level 11

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..