Roth IRAs

Submitted by Anthony Zalesky on Mon, 2019-12-09 19:03

When a person under the age of 59 1/2 takes out contributions to Roth IRAs, what’s needed for tax reporting and does the client get a 1099-R from the Roth custodian?



Submitted by Alan - IRA critic on Mon, 2019-12-09 19:47

  • Client will get a 1099R. However, reporting differs depending on whether the client is simply distributing all or part of their total regular (or conversion) contributions OR has requested the return of a specific current or prior year regular contribution that may be an excess contribution. The 1099R forms for these two types of distributions have different codes in Box 7.
  • The first case would produce a J coded 1099R (early dist) and would be reported on Form 8606. The person will need to know their cumulative value of regular (or conversion) contributions to complete the 8606.
  • The second case of return of a specific current or prior year contribution will generate a 1099R coded J8 or JP. Only the earnings in Box 2a will be taxable and subject to 10% penalty. Form 8606 is not needed, but the tax return should include an explanatory statement of the transaction.

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