Code T on Your 1099-R: Roth IRA Tax and Reporting Rules

Code T on a 1099-R is the distribution code a Roth IRA custodian uses when it knows you qualify for one of the three exceptions to the 10% early distribution penalty but cannot confirm you’ve met the five-year holding period. It signals no penalty, but it does not by itself mean the distribution is tax-free. The earnings portion can still be taxable as ordinary income if the five-year rule wasn’t actually satisfied.

What Code T Means

The IRS instructions tell Roth IRA custodians to use Code T when one of the following applies and the five-year holding period cannot be verified: you’ve reached age 59½, you’re disabled, or the distribution is going to a beneficiary after the account owner’s death.¹ Those three are the only triggers. First-time homebuyer withdrawals do not qualify for Code T; that exception is claimed by the taxpayer through Form 5329 and the ordering rules, not through the code the custodian writes on the form.

The custodian’s uncertainty about the five-year rule has a simple explanation. The clock starts on January 1 of the tax year you first funded any Roth IRA, at any institution.² Your current custodian only knows about the account you hold with them. If you opened your very first Roth somewhere else years ago, they have no way to confirm it, so they use Code T instead of Code Q.

Do You Owe Tax on a Code T Distribution?

A Roth IRA distribution is fully tax-free only when it’s a “qualified distribution,” which requires two things at once: the five-year holding period must be satisfied, and the distribution must be triggered by reaching age 59½, disability, death, or a first-time home purchase (up to $10,000 of earnings over your lifetime).²³ Code T confirms the second test. The first test is on you.

What saves most people is the ordering rule built into the statute. Roth IRA distributions come out in a set sequence:²

Regular contributions first. Always tax-free and penalty-free because you already paid income tax on them.
Conversion and rollover amounts second, on a first-in, first-out basis.
Earnings last. This is the only bucket that can be taxed as ordinary income when a distribution isn’t qualified.

So the practical question for a Code T distribution is whether the amount you took out is larger than your total contributions and conversions combined. If it isn’t, no earnings came out and nothing is taxable, five-year rule or not. If it is, the portion that dips into earnings is where a tax bill can appear.

A Worked Example

You’re 62 and withdraw $50,000 from a Roth IRA. Over the years you contributed $40,000, and the account holds $15,000 in earnings. The custodian codes the 1099-R with T because it can’t verify when you opened your first Roth.

If your first Roth was funded more than five years ago, the distribution is qualified. All $50,000 is tax-free. You show this on Form 8606 and report zero taxable income.

If your first Roth was funded only three years ago, the five-year rule isn’t met. Your $40,000 of contributions still comes out tax-free under the ordering rules, but the remaining $10,000 is earnings and is taxable as ordinary income. The 10% penalty is still waived because you’re over 59½, which is what Code T already reflects.

How to Report Code T on Your Tax Return

Roth IRA distributions go on Lines 4a and 4b of Form 1040, not the pension lines.⁴ The gross distribution from Box 1 of your 1099-R goes on Line 4a. The taxable portion, if any, goes on Line 4b.

Box 2a Will Be Blank

On a Code T 1099-R, the custodian is instructed to leave Box 2a (Taxable Amount) blank and check the “Taxable amount not determined” box in Box 2b.¹ The custodian doesn’t have your full contribution history across every Roth account you’ve ever held, so it can’t calculate what portion of your withdrawal is taxable. That calculation is yours.

File Form 8606

Part III of Form 8606 is where you work through the ordering rules and determine the taxable amount.⁵ You enter your total basis (all the contributions you’ve ever made to Roth IRAs) and compare it to the distribution. If the distribution doesn’t exceed your total contributions, the form’s instructions tell you to stop: no taxable amount, and you enter zero on Line 4b of the 1040.

File Form 8606 even if the taxable amount comes out to zero. It documents your basis for future years. Failing to file it carries a $50 penalty per failure and leaves you without a paper trail if the IRS ever questions a later distribution.⁶

You Usually Don’t Need Form 5329

Form 5329 exists to claim penalty exceptions the custodian didn’t already flag. Code T is itself the flag. The custodian has already told the IRS that a penalty exception applies, so you don’t need to argue for one on Form 5329. That form comes into play when the code on your 1099-R is Code J or Code 1 and you need to establish an exception yourself.

If You Actually Met the Five-Year Rule

If you know your first Roth contribution was more than five years ago, your Code T distribution is really a qualified distribution and the custodian just didn’t have the information. You don’t need a corrected 1099-R. Complete Form 8606 Part III to show the distribution is fully tax-free, put the gross amount on Line 4a of the 1040, and put zero on Line 4b.⁵

Keep documentation of when you first funded a Roth. Prior-year returns, brokerage statements, and Forms 5498 from your custodian all work. The five-year clock is something only you can prove across all your accounts, and the IRS can ask.

Code T Compared With Code Q and Code J

Roth IRA distributions only use three codes:

Code Q means the custodian has confirmed both the five-year rule and one of the qualifying events. The distribution is fully tax-free and penalty-free, and nothing needs to be calculated on your return.
Code T means the custodian confirmed a qualifying event but not the five-year rule. No penalty, but the taxable portion, if any, is up to you to determine.
Code J means an early distribution with no known exception. It’s used when you’re under 59½ and no exception is apparent, or when the situation requires combining another code (such as 8 or P) with the Roth code.

The IRS does not allow Code T or Code Q to be combined with any other distribution code on the same 1099-R.¹ If another code has to apply, the custodian uses Code J instead.

Inherited Roth IRAs

When a Roth IRA owner dies and a distribution goes to a beneficiary, the custodian may issue Code T if it can’t verify the original owner’s five-year holding period.¹ Death of the participant is one of the three conditions that triggers the code.

The five-year clock carries over from the original owner. If the deceased opened their first Roth IRA in 2018 and died in 2025, the five-year rule is already satisfied and earnings withdrawn by the beneficiary are tax-free. If the owner opened the Roth only two years before death, a beneficiary who withdraws earnings before the five-year window closes will owe income tax on those earnings, though the penalty is still waived.⁷

If the Code Is Wrong

If you believe the custodian should have issued Code Q (because it did have enough information about your five-year history) or Code J (because no exception actually applies to you), contact the custodian first and ask for a corrected 1099-R. If the corrected form hasn’t arrived by the end of February, call the IRS at 800-829-1040.⁸ The IRS will reach out to the custodian and send you Form 4852 to use as a substitute. You estimate the correct figures on Form 4852, attach it to your return, and file. If a corrected 1099-R later arrives with different numbers, amend the return using Form 1040-X.

1
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
2
Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
3
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
4
Internal Revenue Service. 1040 (2025) Instructions
5
Internal Revenue Service. Instructions for Form 8606 (2025)
6
Office of the Law Revision Counsel. 26 U.S. Code 6693 – Failure to Provide Reports on Certain Tax-Favored Accounts or Annuities
7
Internal Revenue Service. Retirement Topics – Beneficiary
8
Internal Revenue Service. Topic No. 154, Form W-2 and Form 1099-R (What to Do if Incorrect or Not Received)