I received roth ira distribution. 1099r shows it code J but it is qualified because it as all contribution, not earnings. Turbo tax is taxing it. How do I fix this?

Forum|Forum|5 years ago
April 4, 2021
3 replies
0 views

No text available

TurboTax Self Employed Online

ColeenD3

Code J:

Early distribution from a Roth IRA

Use Code J for a distribution from a Roth IRA when Code Q or Code T does not apply.

Code J indicates that there was an early distribution from a ROTH IRA. The amount may or may not be taxable depending on the amount distributed and the taxpayer's basis in ROTH IRA Contributions. This information must be entered for the software to calculate the taxable amount.

reggie13955

I used the withdrawal (under 7k) from a Roth IRA to buy my first home, in the 1099-R the code in box 7 shows as J, I believe I am entitled to a hardship deduction and the withdrawal not subject to an early withdrawal penalty or tax on any gains, turbotax does not seem compute such a break. Would appreciate any insights. Thanks

DanaB27

Yes, if you had qualifying expenses for your first home then you do not have to pay the 10% early withdrawal penalty and the distribution will not be taxable if you had the Roth IRA for 5 years since it is a Qualified Distribution (up to $10,000).

Please follow these steps:

Login to your TurboTax Account
Click on the "Search" on the top and type “1099-R”
Click on “Jump to 1099-R” and enter your 1099-R
Answer "yes" when TurboTax asks if you used the money to buy your first home and enter the amount.
Click "continue" after all 1099-R are entered and answer all the questions.
Continue until "Did you use your IRA to pay for any of these expenses?" screen (this screen won't come up if you only withdrew your contributions) and enter the amount under "First Home Purchase".

For your information, you can withdraw contributions you made to your Roth IRA anytime, tax- and penalty-free. Please make sure you are entering your net contributions to the Roth IRA when TurboTax asks.

@reggie13955

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

dmertz

Employee

To reach the question in TurboTax that asks for your basis in Roth IRA contributions, click the Continue button on the page that lists the Form 1099-R that you've entered.

Also, this is an early distribution, not a qualified distribution, requiring Form 8606 Part III to be included with your tax return to show the calculation of the taxable amount (which will be zero if the distribution was less than your contribution basis). TurboTax will automatically prepare Form 8606.

toastabreads

I am trying to follow your instructions but I'm not getting to Form 8606 at all. I've tried searching the help section for Form 8606 and there are instructions of how to get it kicked off but it seems outdated because it says to search for an exact term and there will be an option that shows up, but when I follow those instructions I don't get that to show up. Any advice on how to kickstart Form 8606?

dmertz

Employee

@toastabreads , what is your reason for needing Form 8606? If it's the same as indicated in the original question that started this thread, that you received a code-J Form 1099-R, there is no avoiding TurboTax including Form 8606 in your tax return; entry of a code-J Form 1099-R forces the use of Part III of Form 8606 to calculate the taxable amount from the amount in box 1 of the Form 1099-R and the additional information you provide after clicking the Continue button on the page that lists the 1099-Rs that you have entered.

b12ucehuy

klamerus2 - What did you end up filling out to fix your 1099R w/ code J as you only withdrew your contribution? I am under 59 1/2, from my understanding, I can w/draw my original contribution after 5years, but got my 1099R w/ the following:

box 1- $5000
box 2a - blank
box 2b - checked
box 7 - distribution code - J
box 16 - $5000

AnnetteB6

If the distribution is being taxed as income then you may be missing the basis of the Roth IRA.

You will need to enter information about the basis of the Roth IRA in order to reduce or eliminate the amount being included as income.

The basis of an IRA is the amount that was originally contributed. This does not include earnings that have accumulated in the account over time. You can take a distribution of your contributions to a Roth IRA without any penalty or income tax. Therefore, TurboTax needs to know how much of your distribution was contributions to the account.

After you enter your Form 1099-R, there should be some follow-up questions to go through. One of those questions will ask about Prior Year Roth IRA Contributions. This is where you should enter the amount that had been contributed to the account.

If you do not see those follow-up questions, keep reading below for another method to enter your Roth IRA basis:

Go to Deductions and Credits > Retirement and Investments > Traditional and Roth IRA Contributions and click Start or Update.

This will bring you to a screen with checkboxes to indicate what types of accounts you had in 2023. Be sure that Roth IRA is checked. Click Continue.

If Traditional IRA is checked or if you have a spouse that had either type of account, the next questions will not pertain to your Roth IRA. Continue through this section until you are asked whether you made any contributions to your Roth IRA for 2023. This is the beginning of the section where you will enter details about your Roth IRA, including the basis.

Continue answering the questions according to your situation. On the screen where you see Let Us Track Your Roth IRA Basis, click Yes.

Then, on the screen titled Enter Prior Year Roth IRA Contributions, this is asking for your total contributions for years prior to 2023 (basis). If your basis exceeds your distribution, then the distribution will not be taxable. If the distribution exceeds your basis, then the excess will be taxable.

@b12ucehuy

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

b12ucehuy

Thank you so much AnnetteB6

I figure it out

On form 8606 section 3. Line 22 is the Roth basis you noted (the amount of money I contributed). This should be $5500 for me and Line 25c should come out to be $0.