No, leaving the contribution in the traditional IRA won't cause any problems. If the contribution is nondeductible because of your income and retirement plan at work, you will keep track of your basis on Form 8606. When you take a distribution it will be important to enter the basis because then part of your distribution will be non-taxable.
A benefit of moving it to a Roth IRA would be that the earnings won't be taxable when you later take Qualified Distributions. The traditional IRA distribution will be taxable except for the part that is allocated to the basis (if you make nondeductible traditional IRA contributions).
A backdoor Roth will only work successfully if all of your traditional/SEP/SIMPLE IRAs don't have any pre-tax funds (deductible funds). If you have pre-tax funds in your traditional/SEP/SIMPLE IRAs then the pro-rata rule applies.
Please review the steps to enter your recharacterization into TurboTax:
- Login to your TurboTax Account
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- Answer “No” to “Is This a Repayment of a Retirement Distribution
- Enter the Roth contribution amount
- Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
- 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.
- On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. 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)
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