Fidelity says no taxes owed on Roth distribution but their codes say otherwise. What to do?

MomC

I am over 59-1/2 years old and have had the Roth account for over 20 years but "taxable amount not determined" is checked, "distribution code" is T. Fidelity said "they must remain neutral; cannot say if it is qualified or normal" even though they acknowledge no taxes are due.

It looks like I owe over $24,000 in FreeTaxUSA but really don't know how to let the IRS know I don't owe taxes.

GeorgeM

Hello MomC:

When you reach the Summary tab in our software, click on that tab, and scroll down to the bottom of the Federal Tax Summary screen and click the View tab which will allow you to view a copy of your federal tax return. With your federal tax return open, take a look at lines 4a and 4b. Line 4a should reflect the amount of your Roth IRA distribution; however, line 4b should be be blank indicating that no amount of your Roth IRA distribution is taxable.

If line 4b reflects that some portion, or maybe the full amount, is taxable, then perhaps the solution lies in checking two areas of our software. First, while you probably entered your correct birth date information, go ahead and double check it to make sure it’s correct. Click on the Personal tab, and in the drop down, click on Taxpayer Information and review your birth date information. Our software needs to know that you are over 59-1/2 years of age.

Second, review whether you placed a check mark in the IRA / SEP / SIMPLE box which can be found on the screen “Enter the retirement info from your 1099-R.” To access your retirement information screen, click on the Income tab, then in the drop down click on Retirement Income (1099-R). When you see the Retirement Income screen, click Edit, and the scroll down to where you entered the Box 7 code information. Next to the Box 7 code information, if the IRA / SEP / SIMPLE box has been checked, uncheck it to remove the check mark. Code T in Box 7 is one of the acceptable codes for Box 7 given the type of retirement distribution you effected, and thus, there is no issue with regard to code T in Box 7.

With the correct birth date information, and removing the check mark in the IRA / SEP / SIMPLE box, your federal tax return should reflect that no amount of your Roth IRA distribution is taxable. If your Roth IRA distribution continues to be taxable on your federal tax return, reach out to our Support Staff for assistance so we can take a closer look at your account.