Roth IRA Early Distribution

[Ray in Ohio]

Taxpayer & Spouse each take an early distributution of a Roth IRA. (Code J on 1099R). When I enter the 1099s in ATX, TP gets the 10% penalty but spouse does not. The 1099s are exactly the same. I have double checked the entry, and they're entered exactly same.

My question is: Why is the hubby gettin penalized and spouse does not?

(is ATX racist too?)

[jainen]

>>they're entered exactly same<<

But they aren't supposed to be entered exactly the same--one of them should be coded for spouse!

[Ray in Ohio]

>>they're entered exactly same<<

But they aren't supposed to be entered exactly the same--one of them should be coded for spouse!

Well.... um.. ahem... other than that, they are entered exactly the same.

(the spouse's is coded as such)

[RoyDaleOne]

Wow, husband and wife the same age?

[jainen]

>>other than that, they are entered exactly the same<<

Okay then, they are entered the same. Same dollar amounts, I suppose? But what are they entered IN to? Is your software tracking exactly the same basis for each account?

[Ray in Ohio]

>>other than that, they are entered exactly the same<<

Okay then, they are entered the same. Same dollar amounts, I suppose? But what are they entered IN to? Is your software tracking exactly the same basis for each account?

exact same amount. Hubby is 44 spouse is 42. I entered all the info in the 1099R input screen. For hubby the 8606 and 5329 popped up, but not for spouse. I did not enter any basis for either one.

If I go and combine the amounts and put all on one entry for hubby, he gets penalized for the whole amount. If I combine the amounts and code them as spouse's, she gets penalized nothing.

I am drawing blanks here.

[jainen]

>>If I combine the amounts and code them as spouse's, she gets penalized nothing. <<

This is why we need to elect a woman as President!

[JohnH]

I'll vote for a woman who promises to reduce taxes.

[jainen]

>>For hubby the 8606 and 5329 popped up<<

Here's the deal, Ray in Ohio. When you entered those two 1099s exactly the same, what did they say about the basis that shows on Form 8606? Nothing! That was already in your computer, and it is NOT exactly the same for the little woman.

[Ray in Ohio]

>>For hubby the 8606 and 5329 popped up<<

Here's the deal, Ray in Ohio. When you entered those two 1099s exactly the same, what did they say about the basis that shows on Form 8606? Nothing! That was already in your computer, and it is NOT exactly the same for the little woman.

No basis for either one. This is the second year I am preparing this couple's return, and neither one had any IRA activity last year. No basis was ever entered for either one.

[JohnH]

You've probably tried this, but I'll suggest it anyhow. Have you tried entering her info on ANOTHER 1099-R screen and then deleting the entire original entry? Sometimes a fresh start will work out the kinks, and it's quicker than comparing line-by-line.

[Bart]

For hubby the 8606 and 5329 popped up, but not for spouse.

Maybe you need to manually add the 8606 and 5329 for the spouse.

[jainen]

>>No basis was ever entered for either one.<<

Well, then, enter their basis. You can't expect your software to perform reliably if you don't give it all the data it needs.

[Ray in Ohio]

Ok... Somebody help me out here. I have been reading all kinds of things and I can't get a clear answer. It seems the more I read the more confused I get.

I don't remember ever having to deal with these issues before.

Early Distribution of a Roth IRA. No Exceptions. Total Distribution.

The answer I can't seem to find for sure is: Is the whole amount subject to the 10% penalty or just the earnings?

The way it looks is, they put the money into a Roth IRA in 2006 and pulled it back out in 2007. (don't ask me why) Very little earnings while in the Roth.

What forms, input, etc will I all have to do in ATX?

Thanks in advance for any help. (I need a nap!) (wake me on April 16th.)

[Janitor Bob]

Ok... Somebody help me out here. I have been reading all kinds of things and I can't get a clear answer. It seems the more I read the more confused I get.

I don't remember ever having to deal with these issues before.

Early Distribution of a Roth IRA. No Exceptions. Total Distribution.

The answer I can't seem to find for sure is: Is the whole amount subject to the 10% penalty or just the earnings?

The way it looks is, they put the money into a Roth IRA in 2006 and pulled it back out in 2007. (don't ask me why) Very little earnings while in the Roth.

What forms, input, etc will I all have to do in ATX?

Thanks in advance for any help. (I need a nap!) (wake me on April 16th.)

Manually open a 5329 and make sure that at the top it is marked Spouse's..does that do anything

[jainen]

>>Is the whole amount subject to the 10% penalty or just the earnings? <<

Just the earnings. They already paid tax on the principal before they deposited it. That's why you need to tell your software what the basis is, which is another word for principal.

[Ray in Ohio]

>>Manually open a 5329 and make sure that at the top it is marked Spouse's..does that do anything <<

Got it!! I also opened form 8606 and now it figures it same as hubby's. And I am assuming I enter the basis of the Roth on the 8606. If there were very little earnings, there won't hardly be any penalty.

Is my thinking even remotely close to be correct?

[Janitor Bob]

>>Manually open a 5329 and make sure that at the top it is marked Spouse's..does that do anything <<

Got it!! I also opened form 8606 and now it figures it same as hubby's. And I am assuming I enter the basis of the Roth on the 8606. If there were very little earnings, there won't hardly be any penalty.

Is my thinking even remotely close to be correct?

Sounds good to me