Questions about amending 2019 1099-R

[breemy]

Hi there, the way I did my spouse's backdoor Roth last year is killing me this year.

Here's my scenario:

Despite doing the backdoor for years, in December of 2019, I accidentally put $6000 directly into my wife's Vanguard Roth account for the 2019 contribution. I realized the mistake  and  recharacterized into a traditional IRA in March of 2020. (As an aside, for reasons that Vanguard explained to me, and which I briefly understood, but which I can't remember now, despite having $6000 in a money market account, when recharacterized the total was reduced to $5793. ) I then took that $5793 in the traditional IRA account and proceeded to invest it in a 2045 target account which grew to $7787 by December of 2020 and then I did a conversion back to a Roth account. I did the 2020 year contribution simply in December by putting $6000 into a money market into the traditional IRA and then converting a week later into the backdoor Roth.

My wife's 2020 1099 form has 3 distributions listed on it for 2020, the $6000 I did correctly the easy way, the $7787 which are both listed as "contributory IRA". Then the $5793 is listed as "Roth IRA" with a taxable amount of 0 and a distribution code of R on the form for the recharacterization. When I enter the 1099-R data which includes the $5793 into Turbo Tax, it states that I need to amend the 2019 returns, but I'm not sure what to amend.

Her 1099-R for 2019 tax year looks as follows:
1. 6,000
2. 5,500
3. 11,500
4. 6,000
5. 5,500
6. 0
7. 0
8. 5,503
9. 5,503
10. .999
11. 5,500
12. 0
13. 5,500
14. 6,000
15. 0
16. 5,503
17. 5,500

I'm trying to do the taxes on Turbo Tax which always seems to make the Roth more complicated than it needs to be, but any help or guidance anyone could provide would be immensely appreciated.

Thanks so much,

[DanaB27]

You will only need to amend your 2019 tax return if you did not already report the recharacterization on your 2019 tax return like this:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount  $6,000
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount $6,000 (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $6,000 minus $207 loss were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (this makes it nondeductible to be able to do the backdoor Roth and creates Form 8606)

If you report it like above then you do not need to enter the 1099-R with code R on your 2019 tax return.  A 1099-R with code R will do nothing to your return.

Please see How do I amend a 2019 return in TurboTax? for instructions.

On your 2020 tax return:

To enter the nondeductible contribution to the traditional IRA:

1. Open your return
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed $6,000
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter the two 1099-R distribution/conversion: 

1. Open your return
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
6. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
7. On the "Your 1099-R Entries" screen click "add a 1099-R"
8. Enter the information from your 2nd 1099-R
9. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
10. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
11. On the "Your 1099-R Entries" screen click "continue"
12. Answer "yes" to "Any nondeductible Contribution to your IRA?"
13. Answer the questions about the basis

[breemy]

Thanks so much, but when I start at the first step for the 2019 amendment and put IRA contributions in the search box, I do not see the "Jump to IRA contributions" that you suggest I click on.  I used the online version of TurboTax in 2019 and I am trying to amend using this as well. 

[DanaB27]

Please follow these steps when amending your 2019 return:

1. Select "Federal"
2. Select "Deductions & Credits"
3. Scroll down to "Traditional and Roth IRA Contributions" and click "edit/start"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount  $6,000
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount $6,000 (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $6,000 minus $207 loss were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (this makes it nondeductible to be able to do the backdoor Roth and creates Form 8606)

[breemy]

Thanks again so much for your help.  I'm following everything up until step 4 now.  However, while doing my 2019 taxes, I indicated that my wife had contributed to a traditional IRA because I had recharacterized by the time I was doing my taxes.  Now Turbo Tax is asking me if I want to delete the entry regarding her Traditional IRA.  Should I just enter the information in the Roth IRA section and get rid of the checkmark next to the Traditional IRA section that I put in last year?  Again the situation is as follows for backdoor Roth in 2019

1. I made a contribution accidentally of $6000 directly to Roth in December of 2019

2. I recharacterized this into a Traditional IRA after realizing my mistake and $5787 was transferred to her Traditional IRA

3. I reinvested the money into a mutual fund in a Traditional IRA and by the time I converted back into the Roth IRA in December of 2020 it had grown to something like $7700.

Appreciate so much your help.

[DanaB27]

Yes, you will have to unselect the traditional IRA and confirm that you want to delete the traditional IRA contribution. Then enter the recharacterization under the Roth IRA as mentioned above.