After you file

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@71YTA31 wrote:

Hi,

 

When filing an amended tax return for a 2020 Roth IRA recharacterization to a traditional IRA for excess contribution, do you file as a "special situation" pursuant Section 301.9100-2 Election, or do you just file with a brief description outlining the recharacterization?

 

For example, excess contribution was made in 2021 to Roth IRA for 2020 tax year before May 17th, 2021 and recharacterization to traditional IRA completed after May 17th.

 

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If you filed your 2020 tax return on time (by May 17) then you have an automatic extension until Oct, 15, 2021 to do the reharacterization.

Do not amend not until you receive the 2021 1099-R from the financial institution in Jan of 2022.  You should receive a 1099-R with a code R for that.

When you amend - enter it this way;

A 2021 1099-R with a code R in box 7 (Recharacterized IRA contribution made for 2020 and recharactorized in 2021) will tell you that you must amend 2020.

A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2020 return. It does not get sent to the IRS and nothing goes on the tax return at all. The only purpose of the 1099-R is to report the recharacterization to the IRS, but it still must be reported on your 2020 tax return.

The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

The proper way to report the recharacterization and earnings which is to enter the 2020 IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount The amount of the original Roth contribution must be entered - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

That is the only way to prepare and attach the proper explanation statement for a code R 1099-R.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2020 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.