Reporting removal of excess Roth IRA contributions: Incorrect distribution code

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
dangdongho1
Posts: 1
Joined: Sun Feb 04, 2018 7:31 pm

Reporting removal of excess Roth IRA contributions: Incorrect distribution code

Post by dangdongho1 » Sun Feb 04, 2018 7:33 pm

Hi Bogleheads :) Apologies for posting on what seems to be a pretty common topic here on the forums, but I can't seem to find an answer for my specific question on the boards.

In 2015 I opened a Vanguard Roth IRA and contributed $5,500 to it. I had greatly underestimated what I would earn that year, the upshot being I was not allowed to make any contributions to a Roth IRA for 2015. To correct this, I withdrew the contribution in it's entirety plus the earnings ($5,777 in total, the entirety of the account) in March of 2016, before the tax filing deadline. I filed Form 4852 (a substitute 1099-R) because I wouldn't get the 1099-R covering this withdrawal from Vanguard until this year. I included the earnings in my taxable income for the year (line 15b) and paid the 10% penalty on the early withdrawal of the earnings ($28) in my 2015 taxes.

Fast forward to this year. I did receive a 1099-R from Vanguard, but the distribution code is simply "J" and not "JP" as I had anticipated. I called Vanguard to see what the issue was, and it looks like I made a mistake by simply withdrawing the amount and not requesting the withdrawal as a return of an excess contribution. The customer service person I talked to made it seem like getting the distribution code changed would be impossible.

I've been reading through the tax code and various IRS publications trying to figure out how to report this for taxes this year. According to the instructions for Form 8086 (https://www.irs.gov/pub/irs-pdf/i8606.pdf, near the bottom of the middle column of page 5):

"If you made a contribution for 2015 and you had it returned to you in 2016 as described above, don’t report the distribution on your 2016 tax return. Instead, report it on your 2015 original or amended return in the manner described above."

Since I've already reported this in my 2015 taxes do I not include this 1099-R in my 2016 taxes? Seems like wishful thinking to me... I know I could explain it to a human and provide the correct documentation to prove everything was taxed correctly, but also know a computer at the IRS will see the missing 1099-R from Vanguard and flag me immediately.

Does the checked "taxable amount not determined" box on this 1099-R mean that a J or P might not be necessary? In that case it looks like I might have to file myself and not with TurboTax. There doesn't seem to be a way of entering the 1099-R there and not have it wind up affecting box 15b.

Am I sunk or do I have some recourse here? Thank you for any advice!

Post Reply