Hi everyone,
I have a question regarding an overcontribution I made to my Roth IRA account in 2020, the actions my brokerage took to correct this, and how I should handle it in my taxes.
I have done my best to lay out the entire scenario below. I sincerely appreciate your help!
Context:
In April, I deposited the maximum $6k into my Roth IRA account
I did some stock trading within my Roth IRA account using that $6k and ended up adding ~$4k more in gains.
In early December I realized I would be over the income limit for Roth IRA contributions 2020, and as such I reached out to my brokerage's customer service to walk me through next steps for correcting this.
The brokerage rep helped me to initiate a recharacterization of my $6k plus the gains, pushing this money into an empty Traditional IRA account. I can see that on one day in December 2020, my total balance in the Roth IRA account dropped by ~$10k (around the amount for the $6k + $4k gains) and flowed into the Traditional IRA
A few days later I saw that the ~$10k was converted back into my Roth IRA account.
My brokerage issued me two 1099-R forms: one for the Roth IRA account, and one for the Traditional IRA account.
On my 1099-R for the Roth IRA, it shows:
On the 1099-R for the Traditional IRA, it shows:
$9571.17 Gross Distribution
$9571.17 taxable amount
The "Taxable amount not determined" and "Total distribution" boxes are checked.
Distribution Code = 2. IRA/SEP/Simple is checked.
For each of these 1099-Rs, TurboTax asks me the following:
"Tell us if you moved the money through conversion:
Option 1: I rolled over some or all of it to an IRA or other retirement account within the time limits (normally 60 days)
Option 2: I converted some or all of it to a Roth IRA
Option 3: I did a combination of rolling over and converting some or all of this money
Option 4: I didn't rollover or convert this money"
My Question:
Based on your understanding of the recharacterizations/conversions I outlined above, how do you recommend I answer this question for the Roth IRA 1099-R and my Traditional IRA 1099-R? I am confused about whether I need to answer these questions for both my 1099-Rs, or just one, and how I should be answering.
Also, are there any other steps I will need to take within TurboTax to ensure I don't pay unnecessary taxes on the overcontribution that was fixed?
Thank you so much for reading and providing your support!
