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To confirm the $6,000 was a contribution for 2021? If yes, then you will enter the contribution under IRA contributions and make it nondeductible. During the interview you will be able to enter any prior year basis (after-tax funds) you had, that were reported on Form 8606 in previous years (please see steps 9 and 10 when you enter the contribution or steps 11 and 12 when you enter your 1099-R for the conversion).

 

If your total value of all traditional/SEP/SIMPLE IRA is $0 on December 31, 2021 then only the gains of $2,000 and $3,700 pre-tax funds will be taxable (assuming your 2019 contribution was $3,500 and you enter the recharacterization correctly).

 

 

To enter 2021 the nondeductible contribution to the traditional IRA:

  1. Open your return
  2. Click “Deductions &Credits” on the top
  3. Click "I'll choose what to work on"
  4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start
  5. Select “traditional IRA
  6. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  7. Enter the amount you contributed
  8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” since you had nondeductible contributions before this tax year
  10. Enter the basis from 2019 Form 8606 line 14.
  11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (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).

 

To enter the 1099-R distribution/conversion: 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. On the "Your 1099-R Entries" screen click "continue"
  11. Answer "yes" to "Any nondeductible Contribution to your IRA?"
  12. Answer the questions about the basis from prior years (2019 From 8606 line 14) and the value of all traditional, SEP, and SIMPLE IRAs

 

@Anonymous

 

 

 

 

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