No, this statement is referring to the entry on Form 1040 line 4. Basically, if you recharacterized a contribution for 2020 in 2020 you will get Form 1099-R with code N which is entered on your 2020 tax return.
If you recharacterized a contribution for 2020 in 2021 you will get Form 1099-R with code R which you don't enter on your 2020 tax return. You will only make the entry in the contribution section and fill out the explanation statement stating that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
Line 4 of Form 8606 will have contributions (no earnings) made for 2020 from January 1, 2021, through April 15, 2021. This will only be filled out if you made a conversion (or took a distribution from your traditional IRA) in 2020 otherwise it will be blank. You will enter it during your contribution interview when TurboTax asks how much you contributed to the traditional IRA.
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “traditional IRA”
No, line 4 on Form 8606 won't be $2,317 because you made the Roth contributions that were recharacterized in 2021 in 2020. Therefore, it is deemed to have been made in 2020. It should be $1,000.
Please be aware, that earnings that were earned in the Roth IRA before recharacterizing are not included in the basis of the traditional IRA. They are deemed to be earned in the traditional IRA and therefore will be taxable when you make a conversion. Therefore, your total basis should be $2,000 for 2020.
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