1099-R Question
Hello, I have a client who is 80 years old and did a return of excess from a Roth in 2024 and on the 1099-R in box 7 the coding is PJ. My custodian will only use code T on Roth distributions and they told me the following when I questioned the coding of PJ:
The distribution is a prior-year return of excess, which is reported with code P. According to the IRS 1099-R reporting instructions, code J is used for a Roth distribution when Code Q or T does not apply. For Code T and Q, the instructions state: If any other code, such as 8 or P, applies, use Code J.
Does this make sense to you as well? The client was looking at the box 7 definition’s and saw J was for early distributions and is pushing back on this.
Any feedback would be greatly appreciated. Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2025-03-11 10:18
PJ is correct for a return of excess Roth contributions. 8J would apply if the contribution was made in 2024 or PJ if the contribution was made in 2023. J or P denotes which year and earnings on the excess would be taxable, therefore any gain returned with this excess will be taxable in 2023 on a 1040X. The J code simply means this is a Roth IRA and must be used with J or P for any return of Roth excess by the due date.
Code T should not be used with a return of Roth excess, as the IRS would view Code T to signify just a normal distribution, with any excess still remaining in the Roth IRA. The T code might also result in any gain on the excess not being taxable or for the tax program to ask if the Roth IRA has been held for 5 years, and that does not matter with a return of excess.
The entire 1099R coding program is stretched and needs total revision. This particular combination for Roth excess removals is certainly not intuitive, requiring use of the J code for an 80 year old.
As you posted, the instructions indicate that when 8 or P apply (return of excess) J must be used as that distinguishes a Roth IRA. Traditional excess return is just J or P.