ROTH distribution question

[Terry O]

Now that a very fortunate few of us are actually getting some work done (after spending a total of 5 hrs on phone - -countless hours trying to get the program working and doing some very scary file name changes) I have an actual tax question!

Client pulled $3500 (out of a total 4800) in ROTH annuity last year. When she called me - -she told me that she was taking a return of her investment (started in 2001 - -stopped contributing in 2005). This resulted in a 1099R that has Tax amount not determined and - - -wait - - -for it - - -Distribution code "J".

No she is not 59 1/2, but her agent (you know - -the ones who are always there) yesterday told her it was a withdrawal of her investment.

My problem is - - this woman ( who WORKS for the company) - -has NO IDEA what I was asking for - - -I kid you not - -5 phone calls yesterday.

Do I try to get her company to correct the 1099R???

Or is there a way to explain this and take the penalty and tax off.

It is going to be a L- - - - O - - - -N - - - - -G SEASON!

[grandmabee]

doesn't it have to a code J because she is under 59.5? you fill out the 8606 and then no penalty.

[Jack from Ohio]

Roth withdrawal code is "J". Use 8606 and indicate that she withdrew basis. (if her basis is higher than the amount she withdrew) Put 0 in the taxable amount. I think ATX will recognize the J and not add it to taxable income.

[joanmcq]

The calculation for the amount taxable for a Roth distribution is on page 2 of the 8606. Put in her basis, and it should show no penalty (as long as no earnings are withdrawn). No need to put ANYTHING in the taxable distribution box on the 1099-R input form. IRA distributions, Roth or otherwise, never show a taxable amount in box 2.

[Terry O]

THANK YOU!!!! I believe they call this an "ID-10-T" error - - I seriously thought I was putting the info on the correct line - -I am not going to blame the lag time for input - - but the rhythm is OFF!

Thank You again! - - -OY!