Help understanding 1099-R with blank Box 2a and checked Box 2b (taxable amount not determined)

14 For a Roth IRA distribution, the taxable amount depends on whether it's a qualified distribution or not. Since Box 2b is checked (taxable amount not determined), the payer is basically saying "we don't know if this is taxable or not" - they're leaving it to you to figure out. Here's what matters: If your daughter has had the Roth IRA for less than 5 years OR she's under 59½ and doesn't qualify for an exception, then the earnings portion (not the contributions) would be taxable. If it's a qualified distribution (5+ years AND she's 59½ or meets an exception), then nothing is taxable. For Box 2a, you need to determine what portion, if any, is taxable. Since it's a small amount ($650 or so), it's very possible that it's mostly contributions which aren't taxable. You'll need to enter the amount that represents earnings only, which could be very small or zero.

5 I went through something similar last year with my own Roth IRA withdrawal. After hours of frustration, I found this tool called taxr.ai (https://taxr.ai) that really helped me sort it out. It basically analyzed my 1099-R and showed me exactly what was taxable. For your daughter's situation, it sounds like the payer didn't calculate the taxable amount (which is why Box 2b is checked). The tool walks you through figuring out what portion is contributions vs. earnings. Since it's a Roth, her contributions came in post-tax and wouldn't be taxable again, but any earnings might be if she's under 59½ and hasn't had the account for 5 years.

12 I just wanted to update that I tried taxr.ai after seeing it mentioned here. It was actually pretty impressive! Uploaded my husband's confusing 1099-R and it immediately identified that our rollover was non-taxable but had been reported incorrectly. Saved us from potentially paying taxes on money that shouldn't have been taxed. The tool explained that for direct rollovers, Box 2a should be zero even though our form had an amount listed. Would never have caught that on my own. It even generated the explanation to include with our return if we get questioned.

7 If your daughter is still having issues figuring out the taxable portion, you might want to try calling the IRS directly. I know that sounds painful, but I used this service called Claimyr (https://claimyr.com) when I had a similar issue with a retirement distribution. Instead of waiting on hold for hours, they had me connected to an IRS agent in like 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I talked to was actually super helpful and walked me through exactly how to report a distribution where Box 2b was checked. They explained that I needed to determine the taxable portion myself based on my contribution basis.

22 I need to eat my words here. After my skeptical comment, I decided to try Claimyr out of pure frustration with my own tax situation. I couldn't believe it, but I was talking to an actual IRS representative within 20 minutes. The agent explained that for my Roth distribution (similar to OP's daughter), I needed to use Form 8606 to calculate the taxable portion properly. Turns out I've been doing it wrong for years! They walked me through how to determine what portion of my distribution was contributions versus earnings. Definitely worth it instead of guessing and potentially getting audited later.

16 My advice: Make sure to fill out Form 8606! That's the form for nondeductible IRAs and Roth distributions. It'll help calculate exactly what portion of the distribution is taxable. The general rule is that Roth contributions come out first (tax-free), then any converted amounts (potentially taxable), and finally earnings (taxable for non-qualified distributions). Since your daughter's distribution is small and the account was only open a few years, it's very possible that it's mostly contributions and very little earnings.

9 I had exactly this issue! The solution is actually pretty simple. Since it's a Roth IRA and Box 2b is checked, you need to determine what portion of the distribution is earnings vs contributions. In TurboTax, there should be a question asking "Do you know your basis in this Roth IRA?" For a Roth that's only been open a few years with a small amount, it's likely very little is actually taxable. Just make sure to enter the total contributions your daughter made to the account (her basis).

This is a really common issue that trips up a lot of people! When Box 2a is blank and Box 2b is checked on a 1099-R for a Roth IRA, it means the financial institution is leaving it up to you to determine what's taxable. The key thing to remember is that with Roth IRAs, you get your contributions back first, tax-free. Since your daughter is 24 and only had the account for 3 years, and it was a small distribution of $650, there's a good chance most or all of it was just her original contributions coming back out. Here's what you need to do: Figure out how much she contributed to the Roth IRA over the years vs. how much it grew. If she put in $600 and it grew to $650, then only $50 would be taxable earnings. If she put in the full $650 or more, then nothing is taxable. Check with the financial institution for her contribution history, or look at old tax documents if she claimed the Saver's Credit for Roth contributions. Once you have that number, TurboTax should be able to handle the rest and generate Form 8606 automatically.