Retirement tax questions

When you recharacterize a contribution to traditional IRA then the earnings are deemed to have been earned in the traditional IRA.

No, you cannot withdraw the earnings from the traditional IRA without a penalty if you are under 59 1/2.

You will enter the recharacterization when you enter the contribution to the Roth IRA on your 2024 return:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount $7,000
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $7,000 (no earnings or losses) on the next screen.
9. TurboTax will ask for an explanation statement where it should be stated that the original $7,000 plus $1,096 earnings were recharacterized.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". 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.

You will get a 2025 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2024 and this belongs on the 2024 return. But a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the Form 1099-R with code R when you get it in 2026. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.