Recharacterization in 2022 for 2021 Tax Year

Forum|Forum|4 years ago
February 9, 2022
1 reply
24 views

Hello,

I found out my MAGI is over the limit for Roth Contributions. In Feb 2022, I recharacterized all my 2021 Roth contributions to a Traditional IRA. My total IRA contributions (Roth and Traditional were still under the limit).

Question: I am using desktop app version of Turbo tax premier. In the deduction sections - do I put anything under the Roth Contributions or should I just I declare all contributions for 2021 under the Traditional? I called Vanguard and they said since the transaction was done in 2022, even though this is for 2021 tax year, I would not get any 1099-R or tax statements for this.

If I declare Roth Contributions in Turbo Tax - can I have an option to say that the entire contribution was recharacterized?

Thank you everyone.

Best answer by DanaB27

Yes, you can say that the entire contribution was recharacterized.

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

Open TurboTax
Click on the Search box on the top and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “Roth IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution
Enter the Roth contribution amount
Answer “Yes” to the recharacterized question on the “Switch from a Roth to a Traditional IRA?” screen
Enter the contribution amount (no earnings or losses)
TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible and you only get a screen saying $0 is deductible)

Next year you will get a 2022 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2021 and this belongs on the 2021 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above and you can ignore the 1099-R with code R next year. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

DanaB27Answer

Level 15

Yes, you can say that the entire contribution was recharacterized.

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

Open TurboTax
Click on the Search box on the top and type “IRA contributions”
Click on “Jump to IRA contributions"
Select “Roth IRA”
Answer “No” to “Is This a Repayment of a Retirement Distribution
Enter the Roth contribution amount
Answer “Yes” to the recharacterized question on the “Switch from a Roth to a Traditional IRA?” screen
Enter the contribution amount (no earnings or losses)
TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible and you only get a screen saying $0 is deductible)

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paulqsAuthor

Level 2

Dana thank you so much for this explanation. Glad to know that when I receive the 1099-R with R code, that I do NOT have to report it and can disregard. I was wondering how would that work as it would be 2023 that I will receive the 1099-R and it would be for the 2021 tax year. This is helpful Thank you!