@InfiniteJoy wrote:
@macuser_22 - Looks like you understand this challenge well, but didn't want to intrude on other posts.
I made a 2020 Roth IRA contribution in early 2020. Then prior to filing my 2020 taxes in early April 2021, I realized the capital gains from a stock sale now left my MAGI too high to make any 2020 Roth contributions.
On April 1, 2021 before filing, I had Vanguard recharacterize the $6000 into a Traditional IRA. They included $281 in gains. So I have just received a 1099-R from the Roth IRA for $6281 with code R in box 7. I also see a 5498 in my Vanguard account from May 2021 still indicating a $6000 Roth contribution for 2020 in box 10.
Then, on April 5, 2021, I did a conversion of the $6281 from that Traditional IRA into my Roth IRA. So I have also just received a second 1099-R from the Traditional IRA for $6281 with code 2 in box 7.
When TurboTax pulls in these 1099-R forms, I end up with $12,562 of income. My understanding from Vanguard is that this should have resulted in $0 of taxable income. But I'm stuck on how to get there.
The 1099-R with a code R will do nothing in TurboTax and can be ignored - it it to report the recharacterization to the IRS. However, you must report it on your 2020 tax return. If you did not then you need to amend 2020 and enter it int the IRA contribution section for Roth and in the interview you say you changed the contribution to a Traditional IRA contribution (recharactorize). When the interview asks you say you want it to be non-deductible. That will produce a 8606 form with the non-deductible contribution in box 1 and 14.
For 2021 when you enter the 1099-R the interview will ask if you had non-deductible contributions - say yes and for prior year contributions enter the box 14 amount from the 2020 8606 form.
**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.**
