Received a 1099-R with incorrect distribution code for Roth indirect rollover - need help

This is definitely something that needs to be addressed. The distribution code in box 7 is critical for proper tax treatment. Code 1 indicates an early distribution with no known exception, which would typically be subject to taxes and penalties. For a Roth-to-Roth transfer, code J is indeed the correct code as it indicates a distribution from a Roth IRA. When financial institutions make errors on tax forms, it's always best to contact them directly and request a corrected 1099-R. These errors happen more often than you might think. While you wait for the correction, you can still file your taxes accurately by reporting the distribution as a non-taxable Roth rollover. On Form 8606, you'll want to indicate that this was a Roth-to-Roth rollover. This will ensure the IRS understands the true nature of the transaction regardless of what the 1099-R says. However, be aware that the mismatch between your reporting and the 1099-R could trigger a notice from the IRS.

I had almost exactly this situation last year with a Roth rollover from Vanguard to Fidelity. The 1099-R came with code 1 instead of J, and I was worried about getting hit with penalties. I spent hours on the phone trying to get it fixed before I discovered taxr.ai (https://taxr.ai). Their document analysis caught the incorrect code immediately and gave me a detailed explanation of why it was wrong and what to do about it. The site actually showed me how to properly report the rollover on my tax return even without the corrected form, and explained exactly what to tell the bank when requesting the correction. Saved me a ton of stress since I knew exactly what to ask for when I called my bank.

I wanted to follow up on my previous skepticism about taxr.ai. I actually tried it with my tax documents including a 1099-R with a similar issue, and I was genuinely impressed. The system immediately flagged the incorrect distribution code and provided really specific guidance on how to handle it. What I found most helpful was the explanation of exactly what to say when contacting my financial institution - they even provided the specific IRS regulations to reference. When I called, the representative immediately understood what needed to be fixed when I mentioned the correct code requirements. Saved me from going back and forth with them trying to explain the issue. It also showed me exactly where to document the rollover on my tax forms so I could file without waiting for the correction. Definitely worth it for complex situations like Roth rollovers.

If you're still having trouble getting your financial institution to issue a corrected 1099-R, you might want to try Claimyr (https://claimyr.com). I had a similar issue with an incorrect code on my 1099-R last year, and after three weeks of getting nowhere with my bank's customer service, I was at my wit's end. I was skeptical but tried their service (you can see how it works here: https://youtu.be/_kiP6q8DX5c) and was connected to an actual IRS agent in about 20 minutes instead of the usual 2+ hour wait. The agent confirmed that code J was indeed correct for my Roth-to-Roth rollover and suggested filing Form 8606 correctly while also requesting a corrected form. With the IRS confirmation in hand, I had much better luck getting my bank to issue the correction. They took me more seriously when I mentioned I'd already consulted with the IRS.

I need to eat my words about Claimyr. After posting my skeptical comment, I was still stuck with my own 1099-R problem (similar issue but with a 401k rollover). I decided to try the service since nothing else was working. No joke - I was connected to an IRS agent in about 35 minutes. The agent walked me through exactly how to handle the reporting on my tax return, and explained what documentation I needed to keep in case of questions later. They even gave me specific language to use when requesting a corrected form from my plan administrator. The most surprising part was how much more helpful the IRS agent was than my 401k provider's customer service. They actually understood the tax code implications of the incorrect distribution code and helped me understand the right way to report it. Definitely changed my perspective on getting help directly from the IRS.

Another option to consider: file Form 4852 (Substitute for Form W-2, 1099-R, etc.) along with your return. I had to do this when my financial institution refused to correct a similar error. You basically create your own corrected 1099-R with the proper code. You'll need to explain that the original form contained incorrect information and attach any supporting documentation showing the rollover was completed within the 60-day window. It's a bit more work but can be necessary if the financial institution is dragging their feet on issuing a corrected form.

One thing nobody has mentioned - have you tried just talking to a human at your old bank? When I had a similar issue, I called and asked to speak with someone in their tax department directly. Explained that the code on my 1099-R was incorrect and potentially subjected me to taxes I didn't owe. Once I got to someone who actually understood tax forms (had to escalate twice), they immediately recognized the error and issued a corrected 1099-R within a week. Sometimes just finding the right person makes all the difference.

I went through almost the exact same situation with my Roth rollover from TD Ameritrade to Schwab in 2022. Got a 1099-R with code 1 instead of code J, and it was a real headache. Here's what I learned: Don't wait around for the bank to fix it if you need to file soon. You can absolutely file your return correctly showing it as a non-taxable Roth rollover on Form 8606, even with the wrong code on the 1099-R. The key is documenting everything properly. I included a statement with my return explaining that the 1099-R contained an incorrect distribution code and that the transaction was actually a qualifying Roth-to-Roth rollover completed within 60 days. Make sure you have your bank statements showing the withdrawal date and the deposit date at the new institution. It took TD Ameritrade about 3 weeks to issue a corrected form after I escalated to their retirement services department, but I had already filed by then. Never heard anything from the IRS about it, so the proper documentation on Form 8606 did its job. The most important thing is not to let the incorrect code scare you into paying taxes you don't owe. A Roth-to-Roth rollover within 60 days is not a taxable event, regardless of what code is on the form.