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socrateaser, Lawyer
Category: Tax
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Experience:  Retired (mostly)
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I started a Roth in 2006. In 2008, I transferred the Roth

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I started a Roth in 2006. In 2008, I transferred the Roth to Vanguard where my 403b was held. In 2010, I converted 140,000 in the 403b to the Roth (value 7,000). Federal Taxes were not withheld. In 2011, I withdrew 47,000 from the Roth to pay federal and state taxes on the conversion. I am 62. I now have a 1099 from Vanguard for the 47,000 withdrawal. Box 1: Gross Distribution, says ROTH IRA PRIME MONEY 47,000. Box 2a: Taxable Amount, says MKT FUND. Box 2b: Taxable Amount Not Determined, has an X. BOX 7 Distribution code is T. My 2011 income was 60,000 from employment and 24,000 from pension after I stopped working. Will I be taxed on the 1099 47,000 at the federal or state level? I live in Nebraska. Thank you.
Submitted: 4 years ago.
Category: Tax
Expert:  socrateaser replied 4 years ago.
You will be taxed at both your federal and state ordinary income tax rate. unless when you make your original contributions to the 403(b) they were taxed such that the account would be treated in the same manner as a Roth IRA. In the latter case, you would have no tax liability.

The reason why Vanguard did not withhold or determine tax liability is because it has no information about your original contributions, since Vanguard was the transferee custodian.

BotXXXXX XXXXXne, if the account was originally tax deferred, then your distribution is taxable.

Hope this helps.

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