We made a $7,000 Roth contribution in 2022 when we didn't qualify due to income limits. TurboTax '22 notified us of that, so we recharacterized the Roth contribution to a non-deductible TIRA prior to April 15, 2023. We entered this information in TurboTax '22, so our '22 forms included an 8606 for $7,000 and an explanation statement for line 4a. We then got 2023 forms 5498 and 1099-R this year (2024) for $7,099.53. The 1099-R has box 7 coded with an 'R' for the recharacterization. The $99.53 is the gain. The 1099-R was imported into our '23 TurboTax. TT asks whether or not the 1099-R form says 2023 or 2024 on it. It's for 2023 and TT says that we may need to file an amended '22 return to account for the gain. Is this true? Do we report this 1099-R on our '23 taxes or can it be ignored? Anything else we need to enter to square this away? It seems we did all of our accounting needed on our '22 taxes except for the gain. Thank you!
You can ignore the Form 1099-R with code R since you reported the recharacterization on your 2022 tax return in the IRA contribution section.
I really appreciate your response! Thank you. So, for the $99.53 gain noted on the 5498 and 1099-R forms, how do we account for that? Will it be included in our 2023 taxes as a normal gain or does it somehow have to be reflected back in our 2022 taxes, which probably means filling out an amended form? We are thinking it would be included in our Fidelity tax reporting statement for 2023.
When you recharacterize a Roth IRA contribution then the earnings are deemed to have been earned in the traditional IRA. Therefore, you do not have to report the gains anywhere else.
The gains will be taxable when you take distributions from your traditional IRA.