Retirement tax questions

If you recharacterized your 2020 contributions, that is reported on your 2020 tax return, even though it was performed in January 2021.  If the IRA contribution is not tax-deductible, then you will generate a form 8606 that tracks your taxable basis in a traditional (deductible) IRA.  You need this form 8606 when you start to make withdrawals, so you can document the non-taxable percentage of the withdrawal.

 

Additionally, if you continued to make non-deductible contributions to a traditional IRA in 2021 or 2022, you will also need to amend the form 8606s from those years.  Then you will use the amended form 8606 from 2022 when you prepare your 2023 tax return.   (Basically, if you had non-deductible contributions before 2020, you use the old form 8606 plus the 2020 Recharacterizations to create a new 2020 form 8606 that tracks your basis.  If you make non-deductible contributions in 2021, you use the 2020 form plus the new information to create a 2021 form 8606, and so on.). The IRS will not keep track of your non-deductible contributions for you, you must keep track using form 8606, and you need to keep a copy of your most recent form 8606 until you start to make withdrawals, however long that might be (it's an exception to the general rule of holding tax papers for 3 or 7 years).