In 2016 I contributed $6,500 to my Roth IRA. HOWEVER, our income for 2016 was too high; so, in early 2017, I worked with Fidelity to recharacterize the original contribution plus earnings to a traditional IRA. This original amount plus earning was $6,954. So, I now have $6,954 of after-tax dollars in my traditional IRA, along with a substantial amount of pre-tax dollars.
In 2020 I did a Roth IRA conversion from my traditional IRA of $5,000. Since I now have some non-deductible or after-tax money in my traditional IRA, because of the recharacterization above, the pro rata rule applies for determining the taxable amount of the $5,000 (I presume!).
I input this $6,954 to Turbotax and got the following message on a screen entitled, "Attach an Explanation.", "The IRA basis we transferred from 2019 is different from the basis entered. Include a brief explanation of why James' basis changed with your return." I did input an explanation into the next screen by clicking the "Prepare an Explanation" link. I then completed the information on my total traditional IRA balance in the next screen.
Is this acceptable to file? Or, do I have to go back to prior years and correct the after-tax, or non-deductible amount given? (I hope not!) Have I missed anything else or am I wrong in some of my assumptions? The effect of this after-tax money on our tax return is quite small, by the way.
Thanks to anyone who can help!
