First-time homebuyer with questions about 1099-R and early withdrawal from 403b Roth

You're in a pretty good position with your first-time home purchase withdrawal! Here's what you need to know: When you withdraw from a Roth 403b, there are two components: your contributions (which you already paid tax on) and any earnings on those contributions. Based on your 1099-R, the $12,000 is likely your contributions, which is why it's non-taxable. The $4,000 is probably the earnings portion, which becomes taxable if withdrawn early. For first-time home purchases, you still face the 10% early withdrawal penalty on the taxable portion, but only on that taxable portion. So you're right - you would only pay the 10% penalty on the $4,000, which comes to $400. When you file, make sure you're using Form 5329 to report the early distribution. You'll need to pay both the $400 penalty plus regular income tax on that $4,000 taxable portion.

After struggling with a similar situation last year, I discovered taxr.ai (https://taxr.ai) and it saved me so much confusion. I had done a 401k withdrawal for a home purchase and my 1099-R form made absolutely no sense to me - the taxable vs. non-taxable amounts had me totally lost. I uploaded my 1099-R to taxr.ai and it broke everything down clearly - which parts were my contributions, which were earnings, and exactly what I'd owe in taxes and penalties. It even explained why certain amounts were taxable while others weren't, which no other service had done for me.

Just wanted to follow up - I decided to try taxr.ai after reading about it here. My situation was pretty similar with an early withdrawal from my 403b for home repairs (not even a purchase). Uploaded my 1099-R and it immediately identified that the distribution code in box 7 qualified me for an exception to the 10% penalty! My tax preparer completely missed this and was going to have me pay an extra $700 penalty unnecessarily. The explanations were really clear and showed me exactly where to report everything on my tax forms. Definitely worth checking out if you're dealing with retirement distributions!

If you're having trouble with the IRS about your 1099-R or early withdrawal, I'd recommend Claimyr (https://claimyr.com). I was in your exact position last year - first home purchase, early withdrawal, and the IRS sent me a CP2000 notice claiming I owed WAY more than I should have. Spent WEEKS trying to get through to the IRS myself with no luck. Claimyr got me connected to an actual IRS agent in less than 20 minutes when I had been trying for days. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent helped me explain that my early withdrawal qualified for the first-time homebuyer exception, and they adjusted my penalty amount. Saved me almost $1,200 in incorrect penalties!

Well I have to eat my words. After my skeptical comment about Claimyr, I decided to try it anyway because I was desperate to resolve an issue with my own 1099-R from a rollover that was coded incorrectly. I'd been trying to reach the IRS for over a week with no success. I used Claimyr yesterday and got connected to an IRS agent in about 35 minutes (while I was grocery shopping, not sitting by my phone). The agent confirmed I could submit a statement from my plan administrator showing the rollover was direct, and that would prevent any penalties. Totally worth it just for the time saved and stress reduction. Never thought I'd be saying this, but it actually works exactly as advertised.

Don't forget about state taxes! You mentioned you're in Florida, which doesn't have state income tax, but that's important for others to consider. I'm in NY and had to pay state tax on my early withdrawal in addition to federal.

Does anyone know if using the money for a first home purchase exempts you from the 10% penalty on a Roth 403b? I know it does for IRAs up to $10k but I thought 403b plans didn't qualify for that exception?

Great question about the 1099-R! Based on what you've described, it sounds like you're dealing with a fairly standard Roth 403b withdrawal situation. The $12,000 non-taxable portion represents your contributions (money you already paid taxes on when you earned it), while the $4,000 taxable portion represents earnings that grew tax-free in your account. Since you didn't have taxes withheld, you'll need to account for this when filing. You'll owe regular income tax on that $4,000 plus the 10% early withdrawal penalty ($400). Unfortunately, as others mentioned, 403b plans don't qualify for the first-time homebuyer exception that applies to IRAs. One thing to consider for future reference - you might want to look into whether your 403b plan allows for hardship withdrawals or loans for home purchases, as these sometimes have more favorable terms. Also, since you're in Florida (no state income tax), you at least don't have to worry about additional state penalties. Make sure to keep all your home purchase documentation - closing statements, contracts, etc. - in case the IRS has any questions about the withdrawal purpose. And don't forget to file Form 5329 with your tax return to report the early distribution properly!