$6000 was contributed to the Roth IRA which later ended up all being an excess contribution. The entire $6000 was recharacterized to a Traditional IRA the same year as it was contributed, 2022. The $6000 experienced a loss so only $5030.36 was actually transferred to the Traditional IRA. This amount in the Traditional IRA then had further losses to $4954.83 when it was converted back to the Roth IRA.
Earlier in 2022 $4845.77 from the pre-existing balance in the Traditional IRA was converted to the Roth IRA. The pre-existing Traditional IRA funds originated from a rollover years prior.
On the 1040 form, line 4b taxable amount, shows $6525.
Why is $6525 showing as taxable when only the $4845.77 conversion should have been taxable? The recharacterization with losses and subsequent conversion back to the Roth IRA should not have triggered any taxes.
1099-R
Gross distribution: $9800.60
2a Taxable amount: $9800.60
2b Taxable amount not determined: X
Total distribution ( )
3-6 are blank
7 Distribution code(s): 2
IRA/SEP/SIMPLE: (X)
8-15 are blank
16 State distribution: $9800.60
17-19 are blank
