Thank you. So once again, I incorrectly contributed to Roth, then recharacterized that to traditional and then did the Roth conversion.
This is what I did.
Under Deduction & Credits section, in Traditional & Roth IRA Contributions:
- For Traditional IRA part: I only marked Roth IRA check boxes >> Entered 6000 as the contribution >> Entered $5968 for amount switched from Roth to Traditional IRA >> Provided explanation that 6000 were contributed to Roth, when converted to Traditional, there was loss) >> Ignored subsequent screen if I want TurboTax to keep Roth basis >> also ignored value of my Roth IRA on Dec 31, 2020
- Then TurboTax said my MAGI puts me over the limit of IRA deductions. >> Then TurboTax said my MAGI puts me over Roth limit. It did some calculation and said $32I put in to Roth is considered excess contribution and I owe 6% penalty. {I am confused- not sure what this calculation is about}
Under Wages & Income section, I imported 1099-R from Vanguard (3 1099-Rs all together)
- code N (Roth to Traditional recharacterization for 2020)…. I deleted this since you said TurboTax ignores it.
- code R (Roth to Traditional recharacterization for 2019) …. I deleted this since you TurboTax ignores it.
- code 02 (Traditional to Roth conversion)…I filled information on this. And got this message from TurboTax: Even though you’re taking money out early, you don’t need to pay a penalty because of your situation. You may still need pay regular tax, but you avoided an extra 10-25%. We’ll factor in any taxes withheld when you took the money out and figure out the rest of your taxes. TurboTax then added to my tax liability.. I am not taking any money out early- it’s a Roth to Traditional recharacterization and then Traditional to Roth conversion. Should not have any tax liability on this. >> Yes to “I converted all this money to Roth IRA >>
Under Tax Tools, Federal Tax Summary
- Shows on 1040 line 4 a that I have IRA distribution that matches to what I entered from 1099-R with code 02 as above.
- Shows on 1040 line 4 b there is taxable amount from this
I am doing something wrong- I don’t know if this has to be done in any particular sequence inside TurboTax.
Also, wonder if Roth conversion tied to 2019 recharacterized Traditional IRA (1099-R with code R) has got anything to do with this. Also, did not get any question if recharacterization was nondeductible.
