Retirement tax questions

Yes, you will need to amend the 2020 tax return to add the recharacterization and statement if you didn't enter the recharacterization when you filed the 2020 tax return. It won't change Form 8606 and you will not change line 4 of Form 1040.

You will use the 2020 TurboTax version to enter the recharacterization and need to delete the direct contribution to the traditional IRA (I assume you entered this since you have the entries on Form 8606).

On the 2020 amended return:

You will enter the recharacterization when you enter the contribution to the Roth IRA

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA” for you an your spouse
4. Answer “No” to “Is This a Repayment of a Retirement Distribution
5. Enter your Roth contribution amount of $7,000
6. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $7,000 (no earnings or losses)
7. TurboTax will ask for an explanation statement where it should be stated that the original $7,000 plus $4,957 earnings were recharacterized.
8. Answer “No” to “Is This a Repayment of a Retirement Distribution
9. Enter your spouse's Roth contribution amount of $6,000
10. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $6,000 (no earnings or losses)
11. TurboTax will ask for an explanation statement where it should be stated that the original $6,000 plus $2,071 earnings were recharacterized.
12. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" and enter the contribution amount (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)

On the 2021 tax return:

1. Click on "Search" on the top right and type “IRA contributions”
2. Click on “Jump to IRA contributions"
3. Select "traditional IRA" and “Roth IRA” for you an your spouse
4. Say "No" to "Did you contribute to a traditional IRA"
5. Continue until "Any Nondeductible contributions to your IRA" and select "Yes"
6. Enter the basis from Form 8606 line 14
7. Answer “No” to “Is This a Repayment of a Retirement Distribution
8. Enter your Roth contribution amount of $7,000
9. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $7,000 (no earnings or losses)
10. TurboTax will ask for an explanation statement where it should be stated that the original $7,000 plus $130 earnings were recharacterized.
11. Answer “No” to “Is This a Repayment of a Retirement Distribution
12. Enter your spouse's Roth contribution amount of $6,000
13. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $6,000 (no earnings or losses)
14. TurboTax will ask for an explanation statement where it should be stated that the original $6,000 plus $576 earnings were recharacterized.
15. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" and enter the contribution amount (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)