Wrongly made Roth IRA contribution for 2018. I did recharacterization of full contribution to Trad IRA recently. Do I need to file 8606? how do i use turbotax for this

 
DanielV01
Expert Alumni

Retirement tax questions

Yes, you need to file Form 8606.  However, this should happen if you "report" the recharacterization correctly.  A recharacterization treats the original contribution as having never happened.  Your 2018 contribution became a nondeductible TIRA contribution.  Thus, you delete your Roth contribution entry, and you put the amount into the TIRA section.  Because the amount will be non-deductible, Form 8606 will be produced to report the basis of the contribution to the IRS (basis is the amount you contributed with after-tax money).  The basis is not taxable when you receive a distribution from the TIRA, but rather only the growth is taxable.  (If you previously filed your tax return, you will do these same steps only doing so through an amended return).

You can choose to get the money back into a Roth through a conversion.  This technique of contributing to a Roth is often called a back-door Roth because it gets around the income limits for a direct Roth contribution.  You may advise your plan administrator of your desire to convert your TIRA back into a Roth, and the Form 8606 that generates with this year's return will be helpful for next year to report the conversion.  (A recharacterization can apply for the previous tax year, but a conversion is reported in the calendar year in which it occurs).

The conversion has a reporting requirement as well.  This will be done next year, but this FAQ provides information to prepare you for this should you decide to make this election:  https://ttlc.intuit.com/replies/6768029

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Retirement tax questions

Thanks.