Do I need to file amended 2018 return due to IRA recharacterization?

vpan · ‎June 21, 2020

For TY 2018, I contributed $5500 to a Traditional IRA which was then recharacterized to a Roth IRA. My income limit was below the limit for contribution to a Roth IRA (MAGI less than $135k) so the Roth contribution shouldn't be an issue.

Because my MAGI was above the Traditional IRA deduction limits of $63k-73k, I did not take any deduction on the Traditional IRA contribution before it was recharacterized to a Roth.

My broker sent me a letter in 2019 saying that there was a $2-3 loss during the 'computation period' for recharacterization.

While doing my TY2019 taxes, TurboTax is saying I may need to file an amended 2018 return because the 1099-R is reporting earnings on the TY2018 contribution. Does the 'earnings' referred to here mean the Gross Distribution in Box 1 on 1099R, or is it referring to the earnings/loss computed on the recharacterization - which as mentioned above is only a loss of $2-3? Do I need to file an amended 1099R in this situation for TY2018?

dmertz · ‎June 21, 2020

If your 2018 tax return did not report this either as a deductible or as a nondeductible traditional IRA contribution, there is no need to amend your 2018 tax return. TurboTax is only reminding to amend if your 2018 tax return reported the traditional IRA contribution and later decided to recharacterize. The gain or loss on the recharacterization is irrelevant.

vpan · ‎June 21, 2020

Thanks for your reply!

On my TY2018 return I did not state any traditional IRA contribution, just a $5500 Roth IRA contribution on a worksheet that was not required to be sent to the IRS. So it appears I don't need to file an amended 2018 return.

Do I need to file amended 2018 return due to IRA recharacterization?

Retirement tax questions

Retirement tax questions