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Tax Guys - Help with Covid Hardship Roth 401k Withdrawal


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Last year, I took (and qualify for) a Covid hardship withdrawal from my 401k, which I split between regular 401k contributions and Roth 401k contributions.

I received a 1099 for each type. The info reported on the 1099 for the regular 401k looks correct. If I am electing to split the taxes over 3 years, it appears that form 8915-E has me enter 1/3 of the withdrawal. Should this value be entered in Box 2A or both Box 1 and 2A in my tax program (H&R Block)?

The 1099 for my Roth 401k includes incorrect information. It is marked with B2 in Box 7, but the incorrect value is reported in Box 5 and Box 11. Box 2a is reporting the amount of Box 1 minus box 5. If I enter this data, as-is, into the tax program, taxes are calculated on the value of box 2a. 

Since this is a Roth, should the Roth 1099 show $0 in Box 2a? Or is this the correct way to report? If it is correct, how do I account for it being a non-taxable Roth? Since Box 7 is marked B2, do I just ignore reporting this 1099? (i.e. will the IRS automatically know this is non-taxable and non-reportable due to the B in box 7?)

Or is this a problem with my tax program by calculating additional tax when code B is present?

 

I have reached out to our 401k company and they are saying the information is correct. So, I found and sent them my records from 2006 and 2007 that show my Roth contributions to prove Box 5 and Box 11 have incorrect data. I don't know whether these fields are that important or whether I need to push to have it corrected.

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1 minute ago, Dragons said:

Last year, I took (and qualify for) a Covid hardship withdrawal from my 401k, which I split between regular 401k contributions and Roth 401k contributions.

I received a 1099 for each type. The info reported on the 1099 for the regular 401k looks correct. If I am electing to split the taxes over 3 years, it appears that form 8915-E has me enter 1/3 of the withdrawal. Should this value be entered in Box 2A or both Box 1 and 2A in my tax program (H&R Block)?

The 1099 for my Roth 401k includes incorrect information. It is marked with B2 in Box 7, but the incorrect value is reported in Box 5 and Box 11. Box 2a is reporting the amount of Box 1 minus box 5. If I enter this data, as-is, into the tax program, taxes are calculated on the value of box 2a. 

Since this is a Roth, should the Roth 1099 show $0 in Box 2a? Or is this the correct way to report? If it is correct, how do I account for it being a non-taxable Roth? Since Box 7 is marked B2, do I just ignore reporting this 1099? (i.e. will the IRS automatically know this is non-taxable and non-reportable due to the B in box 7?)

Or is this a problem with my tax program by calculating additional tax when code B is present?

 

I have reached out to our 401k company and they are saying the information is correct. So, I found and sent them my records from 2006 and 2007 that show my Roth contributions to prove Box 5 and Box 11 have incorrect data. I don't know whether these fields are that important or whether I need to push to have it corrected.

Why do you think your Roth is incorrect?    Did you only get contributions?  Contributions plus earnings?

Withdrawals of contributions arent taxable but any earnings are with a 10% penalty.  ( I dont know the rule changes for covid wihtdrawals)

Roth IRAs.

 

For distributions from a Roth IRA, report the gross distribution in box 1 but generally leave box 2a blank. Check the "Taxable amount not determined" box in box 2b. Enter Code J, Q, or T, as appropriate, in box 7. Do not use any other codes with Code Q or Code T. You may enter Code 8 or P with Code J. For the withdrawal of excess contributions, see Roth IRA, later. It is not necessary to mark the IRA/SEP/SIMPLE checkbox.

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Posted (edited)
1 hour ago, belljr said:

Why do you think your Roth is incorrect?    Did you only get contributions?  Contributions plus earnings?

Withdrawals of contributions arent taxable but any earnings are with a 10% penalty.  ( I dont know the rule changes for covid wihtdrawals)

Roth IRAs.

 

For distributions from a Roth IRA, report the gross distribution in box 1 but generally leave box 2a blank. Check the "Taxable amount not determined" box in box 2b. Enter Code J, Q, or T, as appropriate, in box 7. Do not use any other codes with Code Q or Code T. You may enter Code 8 or P with Code J. For the withdrawal of excess contributions, see Roth IRA, later. It is not necessary to mark the IRA/SEP/SIMPLE checkbox.

The covid exemption waives the 10% penalty. So with a Roth withdrawal, both contributions and earnings should be tax free. My withdrawal contained both (I withdrew the entire ROTH balance).

I don't know for sure that the reporting is incorrect, it's just that if I entered it as-is, H&R Block applies tax. It may be an error with the tax program or I am entering it wrong.

 

 

So if the rules are the same as a Roth IRA, I would leave 2a blank? Or my 401k service should leave 2a blank?

Edited by Dragons
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3 hours ago, Dragons said:

The covid exemption waives the 10% penalty. So with a Roth withdrawal, both contributions and earnings should be tax free. My withdrawal contained both (I withdrew the entire ROTH balance).

I don't know for sure that the reporting is incorrect, it's just that if I entered it as-is, H&R Block applies tax. It may be an error with the tax program or I am entering it wrong.

 

 

So if the rules are the same as a Roth IRA, I would leave 2a blank? Or my 401k service should leave 2a blank?

Earnings are not tax free if you under 59 1/2

 

Edited by belljr
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20 minutes ago, belljr said:

I could be wrong but hardship withdrawal only waives the 10% penalty.  Earnings are still taxed

This is my understanding as well.  

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Thanks guys, then it's super important they get my contribution's (box 5) fixed. We changed 401k companies 2 or 3 times and I'm afraid that some data was lost in the transition.

They are reporting Box 5 less than 1% of the actual contribution on my records.

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