Please help very confused?

[Guest gemski]

I opened a roth ira in 2000 and contributed a total of $4000 since it opened. I withdrew the money in 04 and recieved $3932.00. I asked earlier if I was going to be taxed on it and the answer I received was no. The thing is I received a 1099R in the mail with gross distributions being $3932.00. Does this mean I am getting taxed because I did my taxed and now it is coming up that I owe $215.00. Why am I getting taxed? Can anyone please help me with an answer?

[Guest b2kates]

there should be a box marked if taxable.

[Guest gemski]

Where would the box be?

[ElGuapo]

Custodians will always send a 1099-R for IRA and Roth IRA withdrawals. That by itself doesn't mean it's taxable. Are you using tax-preparation software, or is someone helping you?

[Guest gemski]

I was doing my taxes on h and r block website. And when I entered the 1099r it added it in to my wages for the year and now it says I owe $215. But if I don't add the 1099r in I get a refund of almost $1000.

[wmyer]

The distribution should not be taxable. Line 15a of your 1040 should have the amount of the distribution, and line 15b should have $0 (taxable amount). Your 1099-R should have 2a blank and 2b should be checked (taxable amount not determined). See the instructions for lines 15a and 15b of the federal income tax, and also see the instructions for form 8606.

[GBurns]

The H&R Block system asks you for the boxes checked on W2s and 1099s. Either you did not read the instructions on the screen or you need to get the 1099 corrected.

[John G]

Do examine the 1099 to understand what boxes are checked and do contact your previous custodian to get a correction if necessary. I will offer an alternative solution to trying to get a former custodian to correct a 1099 - - -

Write a short letter explaining that your ROTH was opened in years XX and $4,000 was contributed. Since less than this was withdrawn, no tax is due. Attach this letter to your return. Do not include the 1099 distribution. While this may trigger a question from the IRS, you will be able to point out that your letter explained the circumstances. In my experience, for this dollar amount, that will probably end the issue.

You started your Roth in a rough time when investments did not due well. Some folks saw there Roths get cut in half. I hope you are not discouraged about the whole concept of Roths and investing. Roths are an outstanding tax shelter for long term investing. Unfortunately, many novices were drawn to Roths when they were first created in 1998 and some now think the whole thing was some kind of "con job" on the working guy. Not true! The problem is that novice investors often think in weeks/months rather than year/decades. Over the long haul, investing beats savings because investing links your assets to a growing economy. We don't look like Pilgrims, carry blunderbusts, or seek to dunk witches. CDs and savings are IOUs. Folks that want "safety" never get the same returns as people that accept short term risks. Why? Because you don't need to offer higher returns when you can pitch "safety".

Are you one of the disolutioned new Roth investors? I wonder.

[BPickerCPA]

John,

The 1099R is correct; the custodian on an IRA will always put the total distribution in the taxable box. They should also check the "taxable amount not determined" box, but I never lose sleep over that.

Because it is possible to have multiple Roth accounts, no custodian could possibly know if the distribution is a return of contributions, or income.

As for Gemski, just enter the total amount on line 15a of form 1040 and put zero on line 15b. The distribution is not taxable, assuming you've never taken any other Roth distributions.

[wmyer]

BPicker, why do you say that the IRA custodian will always put the total distribution in the taxable box (box 2a), since the 2004 instructions for box 2a speicifcally say:

Roth IRA. For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case of an IRA revocation and a recharacterization.

[GBurns]

This should give you a good explanation:

http://www.complianceheadquarters.com/IRA/...es/1_14_05.html