Client under 59 1/2 yo cashed-out his Roth IRA

[TAG]

2023 Form 1099-R :  Box 1= $120,473 / Box 2a Taxable= blank / Box 2b= Taxable amount not determined

Box 7 distribution code= J

He thinks he started doing Roth IRAs (Vanguard) about 2013.

I've searched for any worksheets to determine if any of this is taxable or not, but have not found any help.

Please help me.

Terry

 

[Lee B]

See Page 31 & 32 of Pub 590 B   https://www.irs.gov/pub/irs-pdf/p590b.pdf

I wonder who advised him that this was a good idea?

[Medlin Software, Dennis]

A fair chance there was insignificant taxable profit, which is the only part which may be taxable. Remember, the contributions are not double taxed, they were taxed when earned, so they can be withdrawn at any time.

[Max W]

If he doesn't have his Vanguard stmts for each year, V should be able to supply him copies.   He can also get the information from his IRS transcripts of form 5498 and figure it out from that.  

[BrewOne]

What is the age of the taxpayer?  He has passed the 5 year rule, although there might have been conversions that have a different start date.  If this has been Vanguard all along, I would hazard a guess that he has not met the 59.5 rule.

I think Vanguard will likely be the best source, although as Max mentioned, the 5498's will be on the transcript.  With a code J, the key will be contributions (reported on Form 8606).  But you'll only be able to report what can be proven. 

One other possibility, if the custodian changed, you can get an incorrect code on the 1099-R, because the new custodian doesn't know when the Roth was started.

This is just another reminder that IRA's can be deceptively complex.

[jklcpa]

13 minutes ago, BrewOne said:

What is the age of the taxpayer? 

In the title of the post, he is under 59 1/2.

 

On 9/18/2024 at 3:39 PM, TAG said:

I've searched for any worksheets to determine if any of this is taxable or not, but have not found any help.

Please help me.

Terry, you will need to complete form 8606, part III for the distribution.

Afaik, custodians don't complete box 2 for the taxable portion of ROTH IRAs. Instead, it is up to the taxpayer and preparer to figure that amount.

[BrewOne]

d'oh.