[tuhin]

There was withdrawn from Roth Ira.
I received 1099-R form. Distribution code : 8J.
Withdrawn is done within 5 yrs of opening. In this case I need to tax on the gross distribution. The withdrawn was done for the year it was deposited ( same year).

Whether tax is not considered double tax?
Whether tax can be avoided for Roth withdrawn?

[AtlantaTaxExpert]

It depends. Did the Roth IRA earn ANY money during the custodial period?

[tuhin]

No, there was loss for Roth IRa account.
Roth IRA account - deposited in the same year.
Withdrawn was done in the end month of the year.
But I received the 1099-R.
Gross Distribution -
Distribution code : 8J.

What I need to submit so that I can avoid tax on Roth Ira distribution?
It looks like I am paying tax on W2 and Roth Ira distribution for the same bugs?

[AtlantaTaxExpert]

The "8" code indicates that the money received is an "excess contribution", while the "J" code is an early distribution from a Roth IRA.

Yet your post indicates that is was NOT an excess contribution. If it was not, you need to get the custodian to issue a corrected Form 1099-R to reflect the facts.

In general, you do NOT have to pay penalties on a Roth IRA distribution that represents ONLY your original contributions to the IRA.

[ebaines]

Please clarify something - was this Roth account set up as a rollover from a traditional IRA? Since you mention the 5-year rule I'm guessing it was. If so, then presumably you are paying ordinary income tax on the full amount of the conversion, and then later in the year when you withdrew you would only pay (a) ordinary income tax on the earnings (which you note is actually a loss) plus (b) 10% early withdrawal penalty if you are under age 59-1/2. I assume you have received two 1099-R forms - one for the Roth converson and the second for the withdrawal from the Roth - correct? You can use form 5329 to indicate that the return of the conversion as documented on that second 1099-R is not taxable.

[AtlantaTaxExpert]

ebaines has again done a better job of explaining the issues. I had not considered that the Roth IRA may have been a rollover.

[tuhin]

ebaines has again done a better job of explaining the issues. I had not considered that the Roth IRA may have been a rollover.

Roth Ira account was opened in 2010. It was not a rollover. Roth IRa distribution was done in 2011 to non qualified Join account. What distribution code should have been?

[ebaines]

If this was not a roll over from a traditional IRA then the 5-year rule does not apply. The return of your contribution should be tax-free, and the return of any earnings or gains is taxable, as reported in box 2 of form 1099-R. If the earnings are actually a loss, then earnings in box 2 = 0 and the entire distribution is tax free. So the question is: what amount is shown in Box 2?

Reason code 8J is appropriate.