Hello,
I made a $6000 Roth IRA contribution in 2020, then realized 6 months later that I'm not eligible to contribute to Roth IRA due to income restriction. I recharacterized it to a traditional IRA. By the time I recharacterized it, the amount had decreased to $5811 due to the stock market decline in early 2020.
When I entered this to Turbotax, I was told that there will be a tax penalty on the $189 because I put in $6000 but only recharacterized $5811, making it look like the $189 was still left in the Roth IRA as excess contribution while in reality, this $189 was due to stock market loss. Am I entering the information incorrectly? Where should I clarify this on Turbotax or did I do the recharacterization wrong and really should have switched $6000 to traditional IRA no matter what?
I entered Roth Contribution: 6000
Amount switched from Roth to Traditional: 5811
Roth IRA Explanation Statement:
Date of original contribution: x/xx/2020
Date of recharacterization: x/xx/2020
Amount recharacterized: 5811
The amount transferred (recharacterization plus earnings or losses): 5810.98
Reason for the recharacterization: not eligible for roth contribution
Thanks a lot for your help
