Hi,
My brokerage recharacterized my excess ROTH contribution into a traditional IRA. I thought they would recharacterize the current market value, about $5,500, showing a loss from the original $6,000 contribution. But instead, my brokerage recharacterized about $6,500 ($5,500 from the original $6,000 contribution from one fund, and an additional $1,000 from another fund in my ROTH IRA brokerage account).
My brokerage firm said because I had lost $500 from my original $6,000 contribution, they had to recharacterize an additional $1,000 from another ROTH fund to ensure that the $6,000 original contribution was recharacterized into my Traditional IRA. They said the reason that my Traditional IRA value is now $6,500 and (not $6,000) is because the calculations on gains/losses are based on my entire ROTH IRA portfolio.
1) Does this change anything that I need to enter for my 2021 taxes? I had written in the explanation statement of Turbotax:
- 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) $6,000 (the amount I contributed in March 2021 for 2021 Tax Year)
On the screen Roth IRA Explanation Statement, enter the original amount plus the amount of earnings or loss that were recharacterized. I wrote: I recharacterized $6000 minus losses of $500 = $5500.
Am I still telling Turbotax that I recharacterized the exact amount as original contribution, not accounting for any gain or loss?
When I convert the traditional IRA into a backdoor ROTH (as soon as possible), will I avoid paying taxes (whether I had gains or losses) because I will have no distributions?
2) Does this change anything that I need to do for my 2022 taxes? Will I report the backdoor Roth on my 2021 taxes, or on my 2022 taxes?
Thank you!
