Thanks DanaB27.
I did what you suggested and just to summarize my activity:
I had a 5500 'deductible' IRA contribution for 2018 and a 'non' deductible IRA contribution of 6000 for 2019, made in 2020 for 2019.
I converted the deductible and non deductible IRA to Roth in 2020 (total amount being 11590). My1099-R for 2020 shows 11590 with code 02.
I contributed 6000 to Roth by mistake for 2020 in March 2020 and then recharacterized it to Traditional IRA and then reconverted all of it (with gains) to Roth in March 2021.
At the end of 2020, I had a Roth balance of 11590 after conversion from T-IRA plus 6000 from 2020 (which i later recharacterized in Mar 2021). I had no traditional IRA balance at the end of 2020.
Since I converted my deductible IRA balance from 2018 (5590) to Roth, I believe it would be taxable and Turbo tax was calculating it before I made the change of adding the basis. I shall confirm below, what it does now. Earlier it calculated a taxable amount of 5590 (for the converted amount) and added it to my income. But not anymore.
Here is what I did:
1. Went to my form 1099-R which was uploaded through my brokerage account and just checked it again
2. What did you do with the money- i replied "I moved it to another retirement account' and did a combination of rollover, converted etc and the Amount moved to Roth = 11590
3. Put money in HSA- No
4. Withdrawal due to Covid- No
5. Hit Continue
6. Did you take any disaster distribution- no
7. Any non deductible IRA contribution - YES (this is for previous year)
8. Total basis as of Dec 31, 2019- 6000. Is this correct? As this changes my tax amount. I think this is my basis for the 2019 non deductible IRA.
9. Value of all Traditional IRAs as on 31 Dec 2020 - 0 because I had no traditional IRAs. But not sure if my 2020 contribution to Roth (by mistake) and its recharacterization has a role to play here. IS this correct?
10. Let us see if we can reduce your early withdrawal penalty
11. Explain Garima's recharacterization- I did that.
Now the 8606 shows the following:
Line 1- 6000 - is this correct if i recharacterized from Roth to T-IRA and later converted it back to Roth
Line 2- 6000 - this seems to be from the 2019 basis
Line 3- 12000
Line 4- 0
Line 5- 12000
Line 6 -12 - blank
Line 13- 11590 - this does not look correct to me. How does it calculate this?
Line 14- 410
Line 15a- 0
Line 16- 11590
Line 17- 11590 - this was 6000 earlier and i think it 'was' correct because the basis for non deductible is 6k only out of the 11590 that i converted
Line 18- 0 - so it basically removed the tax on my deductible IRA conversion to Roth. This seems wrong. It does not do this in my 8606 (this case is for my wife's account. and i do not have a recharacterization)
I guess we need to figure out how to make the 'deductible' IRA contribution's conversion to be taxable and also have the right basis on 8606.
Really appreciate your patience and help.
Thanks,
