Retirement tax questions

You should have a basis on line 14 of your 2020 Form 8606 because you recharacterized the Roth contribution. This should be your 2020 contribution amount. You will enter this on your 2021 tax return in step 8 when you enter your Form 1099-R for the conversion. Please make sure you enter your recharacterization on your 2020 tax return. you can ignore the 1099-R with code R. It belongs on your 2020 tax return but code R will not change anything on your return.

On your 2021 tax return:

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" (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)

To enter your conversion and basis from your 2020 tax return:

1. Click on "Search" on the top right and type “1099-R”
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
5. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
6. On the "Your 1099-R Entries" screen click "continue"
7. Answer "yes" to "Any nondeductible Contribution to your IRA?"
8. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Please be aware, only your contribution amounts will be nontaxable. The earnings that you had in the Roth before you recharacterized the contributions will be allocated as traditional IRA earnings since a recharacterization means to treat the contribution as if made only to the traditional IRA and never the Roth IRA.