Thank you for you help.
I'm going to have to make sure the IRA Trustee marked the document correctly.
I found example #5 answered the question but not address having to take a withdrawal. The second part of your answer indicates that I will have to take a withdrawal.
Example 5.
The facts are the same as example 4, except that the $3,000 has earned 10%, or $300. To recharacterize, Carolyn transfers $3,300 from "IRA Trustee" to "Roth Trustee" in 2021. The amount recharacterized is $3,000, the amount of the original contribution, not the $3,300 amount that was transferred.
Carolyn receives a 2021 Form 1099-R from "IRA Trustee" showing $3,300 in box 1, no amount in box 2a, code "R" in box 7, and the IRA/SEP/SIMPLE box may or may not be checked.
Carolyn enters the transaction as follows:
Even though the Form 1099-R she received is the 2021 version, the recharacterization applies to a 2020 contribution. Therefore, she must enter the Form 1099-R on her 2020 tax return. She enters the Form 1099-R, lines 1 through 15 as they appear on the printed form she received. She must then indicate that the 1099-R is a 2021 form.
Since this 2021 Form 1099-R is reported on her 2020 tax return, Carolyn will not report it on her 2021 tax return.
Carolyn enters the traditional IRA contribution of $3,000 as a "Regular contribution" on the "Traditional IRA Contributions" screen. She then enters $3,000, not $3,300 as the "Recharacterized contribution." Carolyn also completes the explanation statement. The statement should say that $3,300 was transferred from the traditional IRA to the Roth IRA, and $3,000 was the original contribution and that $300 was earnings. She makes no entry on the "Roth IRA Contributions" screen or the "Recharacterize to a Traditional IRA" screen.
