Our processor leaves box 2a (taxable amount) blank and checks off box 2b (taxable amount not determined). I think box 2a should be filled in with the same amount in box 1. Aren't all IRA distributions taxable???

Not if your customer has made nondeductible contributions to the account. Your bank has no way of knowing which contributions are deductible and which are not.

From the IRS' 1099 -R & 5498 Instructions:

Quote:

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Box 2a. Taxable Amount

IRA or SEP. Generally, you are not required to compute the taxable amount of a traditional IRA or SEP nor designate whether any part of a distribution is a return of basis attributable to nondeductible contributions. Therefore, report the total amount distributed from a traditional IRA or SEP in box 2a. This will be the same amount reported in box 1. Check the “Taxable amount not determined” box in box 2b.

However, for a distribution by a trust representing CDs redeemed early, report the net amount distributed. Do not include any amount paid for IRA insurance protection in this box.

For a distribution of contributions plus earnings from an IRA under section 408(d)(4), report the gross distribution in box 1, only the earnings in box 2a, and enter Code 8 or P, whichever is applicable, in box 7. Enter Code 1, 2, or 4, if applicable.

For a distribution of contributions without earnings after the due date of the individual's return, under section 408(d)(5), enter 0 (zero). Use Code 1 or 7 in box 7 depending on the age of the participant. For a traditional IRA and a SEP IRA rolled over to an accepting employer plan, enter the gross amount in box 1, zero (-0-) in box 2a, and Code G in box 7.

SIMPLE. Enter the total amount distributed from a SIMPLE IRA in box 2a. For a SIMPLE IRA rolled over to an accepting employer plan after the 2-year period (see section 72(t)(6)), enter the gross amount in box 1, zero (-0-) in box 2a, and Code G in box 7.

Roth IRA. For a distribution from a Roth IRA, report the total distribution in box 1 and leave box 2a blank except in the case of an IRA revocation (see page R-2) and a recharacterization (see page R-3). Use Code J, Q, or T as appropriate in box 7. Use Code 5, 8, or P, if applicable, in box 7 with Code J or T and Code 8 or P with Code Q.

However, for the distribution of excess Roth IRA contributions, report the gross distribution in box 1 and only the earnings in box 2a. Enter Code J or Q and 8 or P in box 7.

Roth IRA conversion. Report the total amount converted or reconverted from a traditional IRA, SEP IRA, or SIMPLE IRA to a Roth IRA in boxes 1 and 2a. A conversion or reconversion is considered a distribution and must be reported even if it is with the same trustee and even if the conversion is done by a trustee-to-trustee transfer. For a Roth IRA conversion, use Code 2 in box 7 if the participant is under age 59½ or Code 7 if the participant is at least age 59½. Also, check the IRA/SEP/SIMPLE box in box 7.

Losses. If a distribution is a loss, do not enter a negative amount in this box. For example, if stock is distributed but the value is less than the employee's after-tax contributions, enter the value of the stock in box 1, leave box 2a blank, and enter the employee's contributions in box 5.

For a plan with no after-tax contributions, even though the value of the account may have decreased, there is no loss for reporting purposes. Therefore, if there are no employer securities distributed, show the actual cash and/or FMV of property distributed in boxes 1 and 2a, and make no entry in box 5. If only employer securities are distributed, show the FMV of the securities in boxes 1 and 2a and make no entry in box 5 or 6. If both employer securities and cash or other property are distributed, show the actual cash and/or FMV of the property (including employer securities) distributed in box 1, the gross less any NUA on employer securities in box 2a, no entry in box 5, and any NUA in box 6.

Corrective distributions. Enter in box 2a the amount of excess deferrals, excess contributions, or excess aggregate contributions (other than employee contributions). See Corrective Distributions on page R-3.

Box 2b. Taxable Amount not Determined
Enter an “X” in this box only if you are unable to reasonably obtain the data needed to compute the taxable amount. If you check this box, leave box 2a blank unless you are reporting a traditional IRA, SEP IRA, or SIMPLE IRA distribution. Except for IRAs, make every effort to compute the taxable amount. However, see IRA Revocation (page R-2) and Corrective Distributions (page R-3).

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Yeah, it gets messy. Don't know why they even pretend to have us try to fill that in - no matter what we put, customers call and complain. They should just take that box off...

(sorry about the formatting - for some reason it's taking out the carriage returns from inside the quote... makes it look like one huge paragraph.)

that is a pretty standard practice.