Hi Everyone,
I've never found myself in this situation before and would really appreciate any help/suggestions.
I made a $6000 contribution to my 2021 tax year ROTH IRA in March of 2021. I am working on my 2021 taxes now (March 2022), and my MAGI is too high (for the first time) for me to have been able to contribute to a ROTH IRA in 2021. I spoke to my financial institution (where the ROTH account was created) today, and they have recharacterized my excess contribution into a traditional IRA (I've never had a traditional IRA before). I plan to convert the traditional IRA that I just created into a backdoor ROTH as soon as the money is available to convert, in a few days. ( My Traditional IRA contribution is non-deductible.)
The $6,000 that I put into the ROTH IRA account in March of 2021 is actually only worth $5500 now, so there are no earnings that I will need to pay taxes for - I lost about $500.
I completed all of the steps on Turbotax to recharacterize my Roth contribution as a traditional IRA contribution, including the Roth IRA Explanation Statement.
My question is: Do I need to take any other steps on my 2021 taxes before I file on April 15th? I know that I will receive a 1099-R for the recharacterization (from excess ROTH contribution to traditional IRA) and another 1099-R for the conversion from the traditional IRA to backdoor ROTH IRA, but I will not receive these 1099-Rs from my financial institution until early 2023.
Do I need to "create" a 1099-R and enter it in my 2021 taxes for the recharacterization of the $6000 excess ROTH contribution into a traditional IRA? If so, which figures should I use for the 1099-R? Or do I need to wait until I receive the paperwork in early 2023 and amend my 2021 taxes at that point (which I'd like to avoid)?
I'd like to do whatever I need to do now, and avoid amending tax returns if possible, but I'm confused if I need to "create" a 1099-R form for my 2021 taxes or if I only needed to complete the steps in Turbotax (below). I had no earnings from the excess ROTH contribution - I actually had a loss.
Thanks for any help and advice!
Here are the steps I followed in Turbotax:
To recharacterize your Roth contribution as a traditional IRA contribution in TurboTax, follow these steps:
- Sign in to your TurboTax account and open (continue) your return
- Select Search in the top right of your screen. Search for IRA contributions and select the Jump to link in the search results
- Select Roth IRA and select Continue
- Answer Yes on the screen Did you make a Roth IRA contribution for 2021?
- Answer No on the screen Is This a Repayment of a Retirement Distribution?
- On the next screen, enter your Roth contribution amount
- Answer Yes on the screen Switch from a Roth To Traditional IRA?
- On the next screen, Tell Us How Much You Transferred, enter the excess contribution amount (don't include earnings or losses)
- On the screen Roth IRA Explanation Statement, enter the original amount plus the amount of earnings or loss that were recharacterized.
