1099 - R Code J

[Yardley CPA]

Client received a 1099-R, Code J.  I believe this is a fully taxable withdrawal from a Roth and the program recognizes it as such.  I did some research and there is an exception if the funds were used for a home purchase.  That is not the case in this clients situation.  The only thing I'm questioning is the brokerage statement reflects it as a loan?  Does that play any part in this or change anything?

 

[RitaB]

1 hour ago, Yardley CPA said:

  The only thing I'm questioning is the brokerage statement reflects it as a loan?  Does that play any part in this or change anything?

No, it does not.  Taxpayer has failed to repay it, so it's a withdrawal.  But basis (contributions) in ROTHs are withdrawn first, so that will affect things.

[Pacun]

I thought you couldn't borrow from an IRA... if you did, that was an illegal transaction and killed the IRA.

If it is a Roth IRA, you will have to pay taxes and penalty only on the gains, not the basis as Rita pointed out.

[RitaB]

I took the original post to mean ROTH 401K.