Get your taxes done using TurboTax

Please be aware, that the whole distribution will show as income in TurboTax on the summary screen which shows gross income, not taxable income. To verify that the entry is correct please look at Form 1040 line 4b (taxable amount), it should only have your gains entered as taxable. 

Please be aware, that if you had any pre-tax funds in the traditional IRA on December 31, 2021, then the pro-rata rule applies, and more than only earnings will be taxable. Please make sure you enter the value of all traditional/SEP/SIMPLE on December 31, 2021, after you enter your Forms 1099-R. You can find the value on your end-of-the-year statement.

You do not enter a traditional IRA contribution because you stated that you did not directly contribute to the traditional IRA for 2021. You stated you contributed to the Roth for 2021 and then recharacterized the contribution in 2021 as a traditional IRA contribution. Therefore, you will have to report it with these steps to report to the IRS what you did:

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Answer “No” to “Is This a Repayment of a Retirement Distribution
5. Enter the Roth contribution amount 
6. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
7. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
8. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" and enter the amount (since you doing a backdoor Roth. 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)

If you enter this correctly then TurboTax will create Form 8606 with the nondeductible contribution amount (basis) on line 1, 3 and 5. For example, if you reported $6,000 to the Roth, recharacterized the amount, and make it nondeductible then you will have a basis of $6,000. Then when you convert the funds $6,000 won’t be taxable because of the basis but only if your traditional/SEP/SIMPLE IRAs are empty on December 31, 2021. Otherwise, some of the basis will be allocated to the amount left in the IRA.

@Wonderer1