Why does my client's ROTH IRA distribution show us a taxable?

[rbbartlettconsul]

My client has a Roth IRA distribution in 2022 with blank taxable amount, the taxable amount not determined box checked, and Code T.  I have reviewed his contributions (all rollovers from his Traditional IRA) and all the rollovers were taxed.  

He has had this Roth IRA less than 5 years.  And I know because of that, there is an issue with earnings being taxable. But there is still sufficient funds in the account to cover his earnings.  

I input zero in the taxable amount, since he has basis, but it does not change the taxable outcome: the entire distribution is still showing as taxable.

Any ideas on why it is still showing as taxable?

[qbteachmt]

There are multiple (3) 5-year rules. The one you are referring to is, "Has he had a Roth account for at least 5 years?" It doesn't have to be this same account.

1099-R code T: "Note A code of "T" means the issuer of the 1099-R knows the recipient is over age 59 1/2 but does not know if the Roth IRA was held at least five years. So if the preparer believes this is a qualified distribution and the distribution is not subject to tax, they need to use code "Q" instead."

I don't know what this means: "But there is still sufficient funds in the account to cover his earnings." There are ordering rules to Roth distribution.

"I input zero in the taxable amount, since he has basis"

Does he have enough basis relative to the distribution? Have you entered his basis?

[rbynaker]

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@rbbartlettconsul wrote:

Any ideas on why it is still showing as taxable?

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Just a guess, because ProConnect is built on the Lacerte engine and, in Lacerte, 0 is nothing and -1 is 0.

[sjrcpa]

Somewhere there should be a place to enter his ROTH IRA basis.