@kenlh2020
The new bank is correct. Once you performed the indirect rollover of pre-tax funds into a Roth IRA, that can't be reversed. Sorry about that. At $12,000, you will likely owe about $3000 of income tax (more or less), plus state income tax. To avoid extra penalties for under-payment of taxes, you should either make an estimated tax payment by September 15 of at least $2000, or increase your withholding at your job(s) to cover at least $2000 of the taxes by the end of the year. (As long as you owe less than $1000 when you file your return, and you either made the estimated payment or had withholding to cover the tax, you won't owe a penalty.)
That type of recharacterization was disallowed starting in 2018, I don't know why. I suppose some people were abusing it somehow.
You could make a new contribution to an IRA, up to $8000 per spouse, as long as you have compensation from working. It doesn't matter where the money comes from. But it can't be a transfer from one IRA to another. It could be a withdrawal, and then a new contribution. Whether the IRA contribution is tax deductible depends on your income, job status and filing status as described below. If your income and job situation is similar to 2022, it sounds like an IRA contribution is not tax deductible for you. (see below).
You can always make Traditional IRA contributions up to the limit (for example, $7000 for 2024 plus $1000 catch-up if over age 50). However, if your income is too high, the contribution can't be deducted. The limits are given here, and depend on income, filing status, and if you are covered by a plan at work.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...
https://www.irs.gov/retirement-plans/2023-ira-deduction-limits-effect-of-modified-agi-on-deduction-i...
I have not heard any complaints that Turbotax applied the limits incorrectly, so your contributions for 2022 are probably non-deductible. That creates a "basis" in your IRA, so that a portion of any future withdrawals are tax-free. (For example, if your balance is $100,000 and includes $8000 of non-deductible contributions, then 8% of all future withdrawals will be tax-free even though IRAs are normally taxable.)
To document the taxable basis in your IRAs, you need to keep copies of the form 8606 that is generate for each person who has a basis. Save your form 8606s with your important tax papers for as long as you have funds in the IRA. This is an important exception to the general rule that tax papers can be discarded after 3 or 6 years.)
