@Sika wrote:
In my case, I contributed to a roth IRA account first before recharacterizing to a traditional IRA to do the backdoor IRA. All of this was done in Feb 2021 for 2020 tax season so I don't have 1099 forms yet. In reporting with a downloaded version of turbo tax, what parts of this step by step process should I do differently because my form 8606 and 1040 seem to be riddled with errors at the moment. I would greatly appreciate some help.
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.
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.
Say you do not want to deduct it if the question comes up to 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.
**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.**
