@sjb25 wrote:
Thank you for your help mac_user22. I think Option3 probably works best for now A follow on question if I can do that here ..... So will the original Roth I set up in June 2020 with a contribution of $7000 for 2019 (because the deadline was extended in 2020 due to covid) and a contribution of $7000 for 2020, still count as my 5 year clock to start ticking for the Roth, even thou I technically didn't meet requirements to open one so I can get no earnings yet? I will be under the income constraints in 2022 so can start using it as planned at that time, but was hoping the clock would already be halfway done for my 5 years before I can access it. Is it technically still a Roth account, or will the IRS classify it as just a normal savings account because I was over the income limitations when I created it? THANKS
If you recharacterize to a Traditional IRA, there is no 5 year clock. Recharacterization of a contribution means that the contribution to the Roth is treated a never happening and it was to the Traditional IRA in the first place.
The proper way to report the recharacterization and earnings which is to enter the 2019 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.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
