1099-R for Inherited Roth IRA | Ed Slott and Company, LLC

1099-R for Inherited Roth IRA

An accountant is questioning distribution code T in box 7 of the 1099-R for my client's Inherited Roth IRA, for which Pershing is the custodian. Since the distribution is non-taxable and not subject to penalty, what difference does it make if the code is T, B or some other letter? Should the accountant just ignore Box 7, report the amount of the distribution and indicate 0 for the amount taxable? Would appreciate your thoughts on this.

No Frills

Code T on a 2018 Form 1099-R means that the custodian claims not know if the deceased participant made their first Roth IRA contribution for some year prior to 2014, so they do not know if the distribution is a qualified distribution.  If the participant actually did make their first contribution for some year prior to 2014, meaning that the 5-year period to make the distribution a qualified distributions has been met, the code T is to be treated the same as code Q and the distribution is a qualified distribution, tax free.  If the participant's first Roth IRA contribution was for 2014 or later, earnings, which come out last, are taxable until the 5-year qualification period has been met.  A nonqualified distribution should be reported on Part III of a Form 8606 separate from any Forms 8606 for the beneficiary's own IRAs.


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