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The fact that 1099s aren't issued doesn't mean that the deduction isn't a valid expense of the business, but that the taxpayer isn't compliant with reporting and backup withholding requirements. You may also have clients that have unreported income because some people believe that amounts below the $600 threshold aren't taxable income because the IRS form wasn't issued. I'd suggest that you review the reporting requirements with each of your affected clients that are disregarding the rules and then decide how to proceed ewith those clients, if at all.

In the title of the post, he is under 59 1/2. Terry, you will need to complete form 8606, part III for the distribution. Afaik, custodians don't complete box 2 for the taxable portion of ROTH IRAs. Instead, it is up to the taxpayer and preparer to figure that amount.