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    roth ira's

    a client has several 1099-R's for distributions from a Roth IRA box 2 taxable amounts are not filled in, how do i determine the taxable amount?

    #2
    What is the code

    in box 7? If not early there may not be any taxable amount.
    AJ, EA

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      #3
      Find out the contributions

      I am guessing this is an early withdrawal.

      Contributions to a ROTH are never taxable (because they were not deducted from income), and contributions are withdrawn first (because that's how it is). See TTB chapter 13.

      So, if your client contributed $15,000 to a ROTH and withdrew $10,000, no tax regardless of when it's withdrawn. If he withdrew $17,000, then $2,000 is taxable IF it's an early withdrawal. The $2000 will also be subject to 10% penalty unless an exception applies.

      See instructions to Forms 8606 and 5329.
      Last edited by RitaB; 03-20-2010, 03:35 PM.
      If you loan someone $20 and never see them again, it was probably worth it.

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        #4
        early withdrawals and code J and code 1.

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          #5
          Make sure that is actually correct. I just had one where it was NOT an early withdrawal and was coded incorrectly because current custodian did not know. It had transferred from a previous brokerage.

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            #6
            Absolutely

            Originally posted by Burke View Post
            Make sure that is actually correct. I just had one where it was NOT an early withdrawal and was coded incorrectly because current custodian did not know. It had transferred from a previous brokerage.
            Burke is so right. Frequently the codes are not correct. Gives us lots of venting material on here. And Form 5329. I have three clients whose code is always wrong. One is in his seventies, and it still has the early distribution code every year.
            If you loan someone $20 and never see them again, it was probably worth it.

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