1099-R on Roth IRA annuity payment

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    Alan S.

    Since the last conversion was in 2012, and based on what was posted on the TIIA board, it is highly doubtful that this distribution relates back to the taxable TIRA account. The error appears more recent, well after the entire value was in the Roth IRA. Accordingly, I see no reason that this distribution including the earnings should be coded other than Q.

    One thing that hampers the 4852 approach is that your 1099R might not be clearly recognized by the IRS as a Roth IRA, although the Q coded 1099R you also received probably shows the same account. Otherwise, the 4852 is a mainstream solution (which I noticed is a supported form on one of the free file programs), while trying to use Form 8606 now when you have not been filing it in the past to track your Roth IRA basis, would probably lead to IRS questions.

    The only way a qualified Roth would change to non qualified is the unlikely scenario of a disabled person overcoming a disability prior to 59.5, and their Roth becomes non qualified again. They would then have to again determine how much basis they recovered in the meantime to start filing Form 8606 again. Have never heard of such a case, but that is what you would probably have to do if you filed an 8606 to make the distribution non taxable under the Roth IRA ordering rules.

    Maybe you can reach the tax people at TIAA.


    Alan, can you see the message I just posted that starts with
    “I will try to get in touch with the tax people, but doubt that TIAA will allow that.” ?

    I cannot see it myself, but perhaps it is visible to others. I have reported the problem on “Our Website”.

    Alan S.

    I do not see it.


    (Slightly revised post to avoid being treated as a duplicate.)

    I will try to get in touch with the tax people, but doubt that TIAA will allow that.

    I would think that in filing form 4852 I could include a note pointing out that all other 1099-Rs issued on this same account were clearly for a Roth. Plus, as you said, the 1099-R for the correction payment is problematic for the IRS because of the contradiction between the “7” code and lack of a check in the line 7 box. I could point that out as well.

    Then, if Form 4852 doesn’t work, I could file Form 8606, Part III as an amendment.

    * * * * *

    When I said I had not filed Form 8606 in the past , I was referring only to the annuity payments, the only Roth IRA distributions I have ever received. According to the 1040 line 15/4 instructions, I did not need to file the 8606 for that because the 1099-Rs were all coded “Q”. The Roth IRAs originating from the 403(b) starting in 2009 were qualified from the very beginning, because sometime before 2001 I had converted a T-IRA originating from a 401(k) to a Roth. The earliest I could have done this was 1998, when I was 62 years old. I have never taken any distributions from that Roth.

    I did file Form 8606 for the Roth IRA conversions in 2009-12, with the following exceptions:

    2009 rollover/conversion from 403(b) – I attached an explanation of line 16.

    2012 conversion from T-IRA – I can find no copy of Form 8606, but can’t believe I didn’t file it. Perhaps I failed to copy it. I did attach an explanation of line 15.

    * * * * *

    So, getting back to filing Form 8606, Part III:

    On lines 19 and 21 I would enter the correction payment. I’m not sure whether this should include the estimated earnings on the underpayment, but that’s a small point.

    For line 22, I need to fill out the “Basis in Regular Roth IRA Contributions Worksheet”, which is based on “the most recent year prior to 2020 you reported distributions on Form 8606.” I have nothing to enter on this Worksheet, because, as explained above, I have never been required to report the annuity payments on Form 8606. So the result is zero for line 22 of Form 8606, and line 23 is the correction payment.

    For line 24, since my 2014-19 annuity payments exceed zero (my basis in regular Roth IRA contributions), I need to refer to the “Basis in Roth IRA Conversions . . . “ chart.
    Does the word “contributions” in the heading for column 1 include conversions?
    If it does, should I include all of the following?
    Roth IRA originating from 401(k)
    Roth IRA originating from 403(b) – not used to purchase annuity
    Roth IRA originating from 403(b) – used to purchase annuity

    However, there’s a glitch in that “the most recent year” is defined in terms of lines 19 and 22 of Form 8606, and I’ve never before had to file a Form 8606 with Part III filled out.

    Alan S.

    As you can see, Form 8606 and the instructions do not contemplate this situation. And Form 4852 does, so that is the better choice.

    If you do decide to use Form 8606, and you are pretty sure that your annuity payments by now have exceeded your regular contributions balance, this 1600 distribution will come from your conversion balance. I think you have enough regular and conversion basis info and distribution info to ignore the charts, and you have not been filing an 8606 anyway, so I would just show what you think is your remaining conversion basis on line 24 and that would be enough to make line 25a 0.


    With regarding to getting redress or an adequate explanation from TIAA, someone on the Morningstar TIAA forum suggested that I contact the custodian of the Roth IRA. The custodian is “TIAA, FSB”. So far I have found no way of communicating with them directly, without going through one of TIAA’s 800 call centers, where they are relying on a statement of “guidance” on this issue. And I wonder if the IRA custodian would have anything to do with this, as the specific IRA account that yielded the annuity no longer exists.

    For purposes of filing the 4852, I assume the $125 estimated earnings on the annuity underpayment is not a qualified annuity payment because it represents earnings on the underpayment after it should have been paid out.

    Is the $125 entered as a taxable amount on the 4852 the same as a $125 1099-R coded “T”? If so, 4.b. “Taxable amount” on the 1040 would be zero because I did Roth conversions before 2015. If not, 4.b. would be $125. I just need to know to avoid confusion on the 1040 form.

    For the 8606, there should be plenty of basis left over after subtracting the annuity payments if I count the basis of all the Roths originating from the 403(b)—not just that portion that yielded the annuity. There is additional basis in the Roth originating from the 401(k), but I presently do not have access to those records.

    Alan S.

    Consider the earnings as part of the total payment. There is no need to break it out as if it was generated on an excess contribution made by you. A correct 1099R would show the total 1600 amount as a Q coded qualified distribution.

    While the 7 code should never be used for a Roth distribution, it does reflect that TIAA did not consider it any different than a normal post 59.5 distribution had this been a TIRA.

    For the 8606, you make a good point that all your owned Roth IRAs are treated as one for tax purposes when it comes to basis tracking. Therefore, your Roth basis recovery should factor in your Roth basis in total less basis recovered in Roth distributions. Perhaps you still have enough basis in conversions to cover the 1600, however using an 8606 could be viewed by the IRS as a suggestion that your Roth is not actually qualified after all. Another reason why the 8606 proposal is a compromise with some flaws.

    Note that most tax programs support Form 4852 with a filed return.

    • This reply was modified 1 week, 3 days ago by Alan S..

    TIAA’s letter didn’t say anything about the $125 “being generated on an excess contribution”. Rather, it’s TIAA’s estimate of what I would have earned outside of the annuity on the late-paid amount had it been paid on time.

    Given that, is treating the entire $1,602 as nontaxable on the 4852 still the best way to go?

    Alan S.

    Yes, the 4852 is the best way to go. You should also include copies of prior Q coded 1099R forms, and perhaps an IRA statement if you have one that identifies the account as a Roth IRA. Since TIIA will not adequately explain this to clients, perhaps they will to the IRS if the IRS takes the time to ask for an explanation.

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