Early for What? Code 6 1099-R

[Snaggletooth]

A "Code 6" on a 1099-R indicates "early" distribution.

"Early" for what reason?
Not 59 1/2?
Not five years?
Either?
Both?

[AZ-Tax]

Early in the morning?

A "Code 6" on a 1099-R indicates "early" distribution.

"Early" for what reason?
Not 59 1/2?
Not five years?
Either?
Both?

Early in the morning : )

[Snaggletooth]

That Didn't Work

The simple question didn't exactly bring forth a chorus of responses, so I guess I'll need to ask the question a different way.

The only "early" distribution discussed in TTB is the situation where a distribution is made before the 5 yr period is met.
Researching other prior threads are also concerned with the 5 yr period.

Nowhere in TTB does it say that a distribution is taxable if subject is not 59 1/2 years old. Researching the prior threads, this is
not discussed either.

Please don't make me feel more like an idiot than I already do by resurrecting some obscure reference or link to a 40,000 page
document unless you think it will actually produce an answer...

So I guess I'll plainly state the questions: Is a Roth distribution (otherwise tax free) taxable to a recipient not yet 59 1/2 years
old? Does it bear the 10% penalty??

[BP.]

A "Code 6" on a 1099-R indicates "early" distribution.

Code 6- 1099-R, from 1099R instructions:
"Use Code 6 to indicate the tax-free exchange of life insurance,
annuity, long-term care insurance, or endowment contracts under
section 1035."

Maybe you have a code "J"?

Is a Roth distribution (otherwise tax free) taxable to a recipient not yet 59 1/2 years old? Does it bear the 10% penalty??

TTB 13-14, middle of right column, and especially the box on TTB 13-5 "Roth IRA Distributions" has good, succinct info on Roth distributions. Age isn't the starting point; first determine which of the 3 buckets the funds were distributed from.

[Snaggletooth]

Thanks to BP

It is indeed a code J. Bank leaves amount of taxable income blank (After reading TTB I don't blame them).

They started this Roth in 2004 and have plundered it many times. It is inconceivable to me that any earnings
remain. Looks like this one is tax free. Of course, Drake is treating the entire distribution as taxable - I'll have
to deal with the nuts and bolts of the software later.

Roth is with a bank. Technically, since the earnings are the last bucket to be tapped, there would always be
a tiny bit of 1% annual earnings - maybe what was earned since the last plunder.

Thanks for the response -

[BP.]

Drake is treating the entire distribution as taxable - I'll have to deal with the nuts and bolts of the software

Any would...until you hit the 8606, where the nuts & bolts are.

[ChEAr$]

It is indeed a code J. Bank leaves amount of taxable income blank (After reading TTB I don't blame them).

They started this Roth in 2004 and have plundered it many times. It is inconceivable to me that any earnings
remain. Looks like this one is tax free. Of course, Drake is treating the entire distribution as taxable - I'll have
to deal with the nuts and bolts of the software later.

Roth is with a bank. Technically, since the earnings are the last bucket to be tapped, there would always be
a tiny bit of 1% annual earnings - maybe what was earned since the last plunder.

Thanks for the response -

Ah, Ron, all you have to do for Drake to treat it right is insert "0" on the 1099r input screen in box 2a. Works every time.

[joanmcq]

It has to go through the 8606. Basis calculation on page 2. Just plunking a zero in there is not exactly doing your due diligence.

[Snaggletooth]

Air-Ball Numbers

Joan, astute observation is appreciated, but I think you are presuming that the taxpayer has 10 years worth of statements from the custodian. If that were the case, the three-way split could be calculated, and the 8606 employed as you say.

I HAVE found out that once a taxpayer survives the 5-year period, he doesn't have to play the waiting game again, ever in his lifetime. Since this Roth was established in 2004, it does beg the question why the bank would code the distribution with an "early" code J.

[BP.]

go through the 8606. Basis calculation

Agree

why the bank would code the distribution with an "early" code

Paraphrasing from 1099R instructions:

Use J when T or Q do not apply. All are Roth codes. T & Q apply if over 59 1/2. J is to be used if those two are not. So J it is. Why not? Is the participant over 59 1/2?

[David1980]

Ah, Ron, all you have to do for Drake to treat it right is insert "0" on the 1099r input screen in box 2a. Works every time.

The 8606 part 3 should be transmitted with the tax return if e-filing or attached with the return if mailed. I don't believe putting a $0 on the 1099R input screen is going to be able to complete 8606. You might have your 1040 looking right but the IRS has no way to know why you believe it to be non-taxable without the 8606?

[David1980]

Roth is with a bank. Technically, since the earnings are the last bucket to be tapped, there would always be
a tiny bit of 1% annual earnings - maybe what was earned since the last plunder.

The "since the last plunder" makes me wonder. Yes, earnings would be the last bucket to be tapped. So if I put $5,000 into a Roth IRA in year 1, and then withdraw $1,000 each year for the 6 following years, the first 5 will be a return of my contributions (no tax). The sixth would be 100% earnings (because at that point I have withdrawn all of my contributions). But that would represent the earnings since the very beginning of the Roth IRA, not since the last plunder?