Get your taxes done using TurboTax

1. No, she doesn't need to add cash. She already contributed $7,000 for 2024. She can contribute for 2025 and then convert the 2024 and 2025 contribution together.

2. Yes, you can contributed $7,000 to the traditional IRA since you withdrew the $7,000 Roth IRA contribution (with a loss).

3. Your wife will select Roth IRA and you will select Traditional IRA. Don't select Roth IRA for yourself since you withdrew the Roth IRA contribution.

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “traditional IRA” for you and "Roth IRA" for your wife
4. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
5. Enter the amount you contributed to the traditional IRA
6. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
7. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “No” since you had no Traditional IRA with basis.
8. Answer ‘Yes” on the “Roth IRA Contribution” screen
9. Answer “No” to “Is This a Repayment of a Retirement Distribution
10. Enter the Roth contribution amount 
11. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $7,000  (no earnings or losses) on the next screen.
12. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx minus $xxx.xx  loss were recharacterized.
13. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (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).

You will each have a 2024 Form 8606 with a basis on line 14 that will be carried forward to 2025.

Your conversion will be reported next year on your 2025 return since it happened in 2025. Please see How do I enter a backdoor Roth IRA conversion? for additional information.