- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
How do I tell how much of the Distribution is taxable with a code T?
Best Answer Click here
Just-Lisa-Now-
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
Remember that the code is from the perspective of the issuer; not the taxpayer.
A code T in box 7 of 1099-R is for a Roth IRA distribution, when an exception applies. It is used for a distribution from a Roth IRA if the IRA custodian does not know if the 5-year holding period has been met but:
- The participant has reached age 59 & 1/2
- The participant died, or
- The participant is disabled.
So, they don't know if there are/have been other, earlier, Roth account(s) and the tax program doesn't know if your taxpayer took out Basis or more.
Don't yell at us; we're volunteers
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
So I have the same similar situation, but the amount was previously converted. AS it seems in publication 509, the order of distribution is converted amount first, then earnings.
However, even with Code T, zero taxable amount, it still or even if i put box 5 contribution for same amount of distribution, it is still being taxed?
Is my only option now to use Code 7 instead so it's not taxable since it is return of contribution?
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
"but the amount was previously converted. AS it seems in publication 509, the order of distribution is converted amount first, then earnings."
https://www.investopedia.com/terms/o/orderingrules.asp
https://www.investopedia.com/retirement/tax-treatment-roth-ira-distributions/
"it is still being taxed?
Is my only option now to use Code 7 instead so it's not taxable since it is return of contribution?"
You don't just randomly change from entering what is on the 1099-R to what you want as results. Have you confirmed this account meets any/all of the 5-year rules?
https://www.investopedia.com/ask/answers/05/waitingperiodroth.asp
https://www.investopedia.com/terms/f/fiveyearrule.asp
Don't yell at us; we're volunteers
- Mark as New
- Bookmark
- Subscribe
- Permalink
- Report Inappropriate Content
I agree, don't just start changing codes. Spend some time on the ProSeries IRA Info Wks. Fill out everything applicable in the Roth IRA section and let the software work for you.
