Retirement tax questions

You have until April 18th, 2022 to make contributions for 2021.

You have to recharacterize a 2021 contribution by the due date for filing your 2021 tax return (including extensions).

You can convert a traditional IRA to Roth IRA anytime.

A backdoor Roth has two parts the contribution and the conversion. It is best to do it in one year to avoid gains but can be done over two years too (contribute in 2021 and convert in 2022).

If you decide to recharacterize your Roth contribution then you will enter the recharacterization when you enter the contribution to the Roth IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (since you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

You will get Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2021 and this belongs on the 2021 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the 1099-R with code R when you get it in 2023. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

You will have a basis on line 14 of your 2021 Form 8606 that you will enter next year on your 2022 tax return if you convert the traditional IRA to Roth IRA in 2022.