So this thread is really helpful as I find myself (now in 2022, and trying to do my 2021 taxes) in the future scenario mentioned in this post from last year, having now received my 2021 1099-R after the recharacterization.
Just like the original poster, I over-contributed to my Roth IRA in 2020 and didn't realize it until 2021. But I did realize it before I filed my 2021 taxes and recharacterized the excess contributions to a brand new non-deductible IRA before filling my 2021 taxes. I also then converted the whole of the non-deductible IRA right back into my Roth, as is popularly done.
When going through the TurboTax workflow last year in 2021 (working on my 2020 taxes), I told it about the recharacterization, and added the note to my tax-return saying that I "recharacterized ____ in contributions and ____ with gains" (whatever the TurboTax template told me to say). I also filed a form 8606 to note the non-deductible IRA contribution.
I tried really hard last year and did tons of research in hopes that I was doing everything correctly. So fast forward to now (Jan 2022).
My IRA institution sent me two 1099-R forms for 2021.
- One for my recharacterization from Roth to a non-deductible IRA, with distribution code "R"
- One for my conversion from the non-deductible IRA back into the Roth, with distribution code "2"
When I enter the recharacterization 1099-R into TurboTax it gives me an ominous warning that "I may need to amend my 2020 tax return". Okay, wtf?
So now I'm scratching my head with the following questions.
- Do I actually need to amend my 2020 return? I don't see what good that would do. And if it's true that I must amend, what in the world do I put in there that I didn't already? (see above paragraph about already mentioning recharacterization in original 2020 return)
- I recognize that I must pay taxes on the gains from the recharacterized contribution that I converted back into the Roth. Back in 2021, I had convinced myself that I would pay those taxes in 2022 for the 2021 tax year since the conversion happened in 2021. Is my understanding accurate that I will account for those gains now for the 2021 tax year? And if so, how do I accurately input this information into TurboTax?
--Editing this to also ask about an earlier reply that I didn't quite understand--
A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2020 return. It does not get sent to the IRS and nothing goes on the tax return at all. The only purpose of the 1099-R is to report the recharacterization to the IRS, but it still must be reported on your 2020 tax return.
I'm still not sure what to do with my 1099-R from my recharacterization. Do I put it in my 2021 return and ignore the "you may need to amend your 2020 return" message from TurboTax?
Does "but it still must be reported on your 2020 tax return" just mean to do what I did above (note the recharacterization in the 2020 return)?
Thanks for any input, it's really appreciated. Hopefully this question will help the other people in my situation that are also wondering whether they need to amend.
