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Retirement tax questions
To clarify, you stated you received a 2024 Form 1099-R in your original post. What was the code in box 7? When you applied to excess to 2024, did you tell your financial institution that you want them to apply it as a 2024 contribution? If yes, then it seems they distributed the excess plus earnings and then made a new contribution for 2024.
If this is correct then you do not need to pay the 6% penalty on your 2023 and 2024 return since you withdrew the excess plus earnings. You made a new Roth IRA contribution for 2024 and are able to request to recharacterize this contribution as a traditional IRA contribution. Please make this request with your financial institution.
You will enter the recharacterization when you enter the contribution to the Roth IRA on your 2024 return:
- Login to your TurboTax Account
- Click on "Search" on the top right and type “IRA contributions”
- Click on “Jump to IRA contributions"
- Select “Roth IRA”
- Answer ‘Yes” on the “Roth IRA Contribution” screen
- Answer “No” to “Is This a Repayment of a Retirement Distribution
- Enter the Roth contribution amount
- Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
- TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
- 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 change nothing on 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.
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