topic Re: 1099-R in Retirement tax questions

1099-R

PM36 — Wed, 05 Feb 2025 19:59:50 GMT

Received 1099-R from a qualify Roth IRA plan. On the 1099-R has code B. The IRS tax me on it. I called the IRS and they told me that line 7 has code B and they told me it should be J for a qualify Roth IRA. The IRS told me to call my company requesting a corrected 1099-R. Please help me understand because I am not sure about code J since this was not and early distribution.

Thanks.

Re: 1099-R

SharonD007 — Tue, 11 Feb 2025 21:36:05 GMT

Code B in box 7 of your 1099-R indicates that you had a Designated Roth Distribution. Review the TurboTax Help article What do all the codes in Box 7 of the 1099-R mean? for more information.

A Designated Roth IRA is a retirement account that's associated with a 401(k) or 403(b). The contributions aren't excluded from your income, which means the contributions have been taxed. Qualified distributions with earnings are excluded from your income. A qualified distribution is:

Made five years after the first contribution
On or after age 59 1/2
Participant's disability or death

Review the IRS Retirement Topics Designated Roth account for more explanation.

Code J is an early distribution from a Roth IRA with no exceptions. The amount may or may not be taxable. It depends on the distribution and the participant's basis in the Roth IRA.

Refer to the IRS tool Is the distribution from my Roth account taxable? to help you determine if your distribution is taxable.

If you feel that there is an error on your 1099-R, contact the issuer and request a corrected copy.

[Edited2/11/25|1:30pm PST]

@PM36

Re: 1099-R

dmertz — Wed, 05 Feb 2025 22:13:09 GMT

Code B indicates that the plan is not a Roth IRA and is instead a designated Roth account in an employer plan (a 401(k), 403(b), 457(b) or the federal TSP). It's extremely unlikely that a financial institution would make the mistake of using code B for a distribution from a Roth IRA, so it seems likely that you are misidentifying the account as being a Roth IRA when it is actually a designated Roth account in an employer plan.

Distributions from designated Roth accounts in employer plans follow different rules than do those from Roth IRAs. Distributions from designated Roth accounts are always a proportionate mix of basis and taxable earnings.

Re: 1099-R

PM36 — Sun, 09 Feb 2025 20:39:09 GMT

Both answers from Sharond007 and Mertz are great; But I still have my dilemma regarding Code J and Q for a qualify distribution code. I terminated my 401k plan after age 65 and for my Roth IRA Qualify Distribution portion they sent me a 1099R with code B. Now my previous employment is correcting the 1099R with code J.

Even the IRS agent suggested to be a code J. Please expand on these two code for a Quality Distribution.

Thanks for all your help.

Re: 1099-R

dmertz — Sun, 09 Feb 2025 22:30:56 GMT

"Now my previous employment is correcting the 1099R with code J."

That makes no sense. I don't see how your previous employer can legitimately generate a Form 1099-R with code J. Code J is only permitted to be used for distributions from a Roth IRA and a Roth IRA custodian who can use code J, T or Q can only be a bank or an IRS-approved non-bank custodian. The original Form 1099-R with code B and your description that the distribution from the Roth account was in conjunction with the distribution from the traditional account in the 401(k) suggests that the distribution was not from a Roth IRA but was instead from a designated Roth account in the 401(k). As such, the code B on the original Form 1099-R would be correct, although it's unknown whether they reported the correct amounts in boxes 2a and 5. A correct code-B Form 1099-R would have the taxable amount in box 2a, the nontaxable amount in box 5, and these would sum to the amount in box 1.

Even if the distribution was from a Roth IRA, code J would still make no sense. Code J means a distribution made to you before you had reached age 59½.

Under no circumstances can code J be correct for this distribution. I suspect that the other information that you have received is erroneous because these providing the information have relied on your seemingly erroneous assertion that the distribution was from a Roth IRA.

Re: 1099-R

Evi1anne1 — Mon, 10 Feb 2025 06:09:16 GMT

@PM36

Something isn't making sense. Seems like B makes more sense than J does. A few of questons:

1. Did you have the Roth plan for more than 5 years before you closed it?

2. Was it a total distribution? Was there any secondary code on the original 1099-R?

3. Prior to closing the account, did you take substantially equal periodic payments?

4. Did you take a loan against this account while still working?

Enter code B, Designated Roth account distribution, to report distributions from a designated Roth account, unless the distribution is a direct rollover to a Roth IRA or is because of a correction under the Employee Plans Compliance Resolution System."

Use Code J, Early distribution from a Roth IRA, to report a Roth IRA distribution when the IRA owner is under age 59½ and codes Q and T do not apply. But use code 2 for an IRS levy and code 5 for a prohibited transaction. Code J should be used if the Roth IRA owner meets the five-year waiting period but the distribution is not qualified because the IRA owner is not yet age 59½, has not died, or is not disabled. Use code J to report a qualified distribution for first-time homebuyer expenses. Also use code J if a Roth IRA owner modified a series of substantially equal periodic payments before being eligible to do so.

Only use Code Q, Qualified distribution from a Roth IRA, when the IRA owner has met the five-year waiting period and is either age 59½ or older, has died, or is disabled (assuming there is proof of the disability).

Use code T, Roth IRA distribution, exception applies, to report Roth IRA distributions before the five-year waiting period has been satisfied (or if it’s not known whether the period has been satisfied), but the IRA owner is at least age 59½, has died, or is disabled (assuming there is proof of the disability). Code T also should be used when the Roth IRA owner takes substantially equal periodic payments.