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Level 1
posted Apr 2, 2024 1:37:16 AM

Roth recharacterization resulted in excess contribution

In 2023, I was originally intending to a backdoor Roth. Instead I contributed 6500$ to Roth directly by mistake. Realized this within a week and reached out to my financial institution. They recharacterized the amount + contributions which is 6504$ to IRA. The 4$ was interest accumulation and it wasn't returned to me.

 

While filing my returns this year, Turbotax is flagging it as excess contribution. I have requested the 4$ + interest to be returned back to me in 2024 before tax filing deadline.

 

When turbo tax asks for any excess withdrawal and I enter 4$, it is adjusting my IRA contribution to 6496$. What I am expecting is for it to show 6500$ and the 4$ to be shown as excess contribution that was withdrawn - not sure if that's a separate form.

 

How can this be fixed. Please help! TIA!

 

P.S I am yet to file my taxes

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1 Best answer
Expert Alumni
Apr 2, 2024 2:20:24 AM

You do not have an excess contribution. Please make sure you only enter the contribution amount (without earnings) when TurboTax asks how much you switched to traditional IRA.

 

You will enter the recharacterization when you enter the contribution to the Roth IRA:

 

  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 ‘Yes” on the “Roth IRA Contribution” screen
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution
  7. Enter the Roth contribution amount $6,500
  8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $6,500 (no earnings or losses) on the next screen.
  9. TurboTax will ask for an explanation statement where it should be stated that the original $6,500 plus $4 earnings were recharacterized.
  10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

1 Replies
Expert Alumni
Apr 2, 2024 2:20:24 AM

You do not have an excess contribution. Please make sure you only enter the contribution amount (without earnings) when TurboTax asks how much you switched to traditional IRA.

 

You will enter the recharacterization when you enter the contribution to the Roth IRA:

 

  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 ‘Yes” on the “Roth IRA Contribution” screen
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution
  7. Enter the Roth contribution amount $6,500
  8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $6,500 (no earnings or losses) on the next screen.
  9. TurboTax will ask for an explanation statement where it should be stated that the original $6,500 plus $4 earnings were recharacterized.
  10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)