What should be the correct distribution code on 1099R for "re-doing" IRA contribution ?

Question

I made the full 2008 Roth IRA contribution in 1/2008. And the market has fallen over the clif in 2008. I understand the I can withdraw my

2008 contribution plus [negative] earnings -- esentially to cancel my original 2008 contribution made in 1/2008 -- with NO tax impact. I did that in 11/2008 -- withdrew the entire 2008 contribution (the broker made the calculation)-- and then make the full 2008 contribution again in 12/2008.

Now, I have the 1099R for that transaction. The code in Box 7 is "8J". The form's explanation for 8 is "Excess contributions plus earnings/ excess deferrals (and/or earnings) taxable in 2008." And J = "Early distribution from a Roth IRA, no known exception (in most cases, under age 59 1/2). [I am over 60.]

"8J" doesn't sound like the correct coding for this. Anyone knows?

TIA

Phil Marti · Accepted Answer

The J is wrong, but it doesn't matter since earnings were negative.  Ignore it.

0b3hks001 · Answer

I forgot to ask a related question -- i.e.  Do I get to deduct theloss [negative earnings] -- either for 2008's tax return OR some timein the future?TIA

smithff33 · Answer

The "loss" is only deductible (as a Miscellaneous Deduction subject to the 2% of AGI rules) if you liquidated ALL your Roth IRA accounts in

2008. Apparently you did not do that, as you immediately jumped back in with a further contribution.

0b3hks001 · Answer

I did not liquidate ALL my Roth IRA a/c -- just 2008 contribution in this particular Roth. So, even if I didn't jump right back in, I can't deduct the loss. But I did put in $5K and get back under $3K. So, that loss is lost forever? [I don't expect the value of all my Roth would be less than my controbutions when I start withdrawing.]

TIA

What should be the correct distribution code on 1099R for "re-doing" IRA contribution ?

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