Retirement tax questions

Yes, you can request with your bank to remove the excess contributions and earnings and apply the contributions to next year (this is not recharacterization). The earning will be taxable on your 2020 tax return.

Or as another option: If your MAGI disqualifies you from contributing to the Roth IRA then you can recharacterize the Roth contribution as a traditional IRA contribution for 2020 and choose to make it nondeductible. Then you are able to convert the funds from the Traditional IRA to the Roth IRA. This is called backdoor Roth conversion. The conversion part will be on your 2021 tax return if you decide to do this.

You will need to request a recharacterization with your bank by the due date of your return. They will move the contribution and earnings into a traditional IRA.  There is no tax or penalty on the earnings since the earning will be simply switched into the recharacterized account. 

You will enter the recharacterization when you enter the contribution to the Roth IRA

1. Click on the Search box on the top 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 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"

Then on your 2021 tax return if you decide to convert you follow these steps:

1. Click on the Search box on the top and type “1099-R”
2. Click on “Jump to 1099-R" and enter the information from your 1099-R
3. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
4. 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"
5. On the "Your 1099-R Entries" screen click "continue"
6. Answer "yes" to "Any nondeductible Contribution to your IRA?"
7. Answer the questions about the basis