Thank you for the quick reply. But I do have a few follow up questions.
If the “outstanding recharacterization” gets shown as the value of the IRA at year end, should it include the earnings that contribution made? In other words, should the Outstanding Rechararacterization that I input in TurboTax be $1000 (just the contribution) or $1114 (the total amount transferred back from Roth to Traditional)?
The other issue I’m having is understanding my current Form 8606, lines 13-15. The goal is to have us convert the recharacterized contribution ($1k + earnings) via “Backdoor” Roth conversion in 2025. But the 8606 isn’t showing the full $1,000 as nondeductible, so I am wondering how this will impact us next year.
As described above, we had pre-tax funds ($2,400) from a 401(k) rolled over to a Traditional IRA, then converted to a Roth IRA. At that moment, the Traditional IRA was empty. In a separate later month, we also made a REGULAR $1,000 contribution to the Roth. At year end, traditional was Zero balance and Roth was ~$3400. In January we had to recharacterize that $1000 regular contribution back to the Traditional due to AGI limits. The pre-tax funds (from the 401k & Roth conversion) and post-tax funds (nondeductible contribution) were never actually in the Traditional IRA simultaneously. But I know the recharacterization makes it seem like it they were there all along. So, the 8606 shows many calculations and numbers that I don’t fully understand, making it seem like the pro-rata rule applies and messes up my basis. Can anyone explain or help? Thank you.
