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Retirement tax questions
In the Deductions & Credits section, TurboTax first goes through Traditional IRA, then Roth (we have both, and after 2020, only use Traditional IRAs for the purpose of doing backdoor conversion to Roth. The Traditional IRAs otherwise maintain a $0 balance and $0 basis).
Traditional IRA section:
So going through the prompts in sequence, "Tell us how much you contributed. Enter the total amount you put into a traditional IRA for 2024, even if you later transferred some or all of it to a Roth IRA. Your total 2024 traditional IRA contributions: ".
This is confusing, because since the sequence of what I did with Vanguard was 1) contribute $7000 to Roth in Nov 2024 before realizing I was not allowed to; 2) correct the disallowed Roth contribution by recharacterizing the $7016 Roth contribution as a non-deductible traditional IRA contribution ($7k contribution + earnings by the December 2024 recharacterization date); 3) In Jan 2025 did a conversion of the non-deductible traditional IRA contribution + earnings to that date ($7062).
At this step in TurboTax, should I enter the $7000? $7016? Or should I enter $0?
I'm inclined to enter $0, because TT has a note here "Do not enter any of the following: Roth contributions (even if you later recharacterized them to a traditional IRA". What I did seems to fit the description in that exception note - the $7000 was first a disallowed Roth contribution that was subsequently recharacterized to Traditional.
- My traditional IRA's 2024 Form 5498 information:
- Line 1 "IRA Contributions", there is no $ value there.
- Line 4 "Recharacterized contributions", $7016.13
- Line 10 "Roth IRA contributions", there is no $ value there.
- My Roth IRA's 2024 Form 5498 information:
- Line 1 "IRA Contributions", there is no $ value there
- Line 4 "Recharacterized Contributions", there is no $ value there
- Line 10 "Roth IRA contributions", $7000
Roth IRA section:
- "Enter your Roth IRA Contributions. Enter your total Roth IRA contributions for 2024, even if you transferred, or "recharacterized" some or all of it to a traditional IRA. NOTE: Include contributions made between Jan 1, 2025 and April 15, 2025 that you want to include on your 2024 return.": $7000
- Am I correct to enter the $7000 here, after entering $0 on the same step in the Traditional IRA series of questions (reference above)?
- "Tell us how much you transferred. How much of the $7000 that you contributed to this Roth IRA did you switch, or 'recharacterize', to your traditional IRA. Amount switched from a Roth to a Traditional IRA:" $7000
- "Roth IRA explanation statement": Below is what I wrote:
- Date of the original contribution: 11/26/24
- Date of the Recharacterization of the gain-adjusted $7016 (original Roth contribution + earnings to date): 12/01/24
- The amount rechacterized: $7016
- The amount transferred (recharacterization plus earnings or losses): $7016
- Reason for the Recharacterization: Realized while doing my 2024 tax return that I was over the income limit for direct Roth contribution, so I recharacterized the entire contribution plus earnings to Traditional IRA so I could backdoor convert to Roth later, before the filing deadline in 2025.
Did I do this correctly?
Although the gains were small, I'm also concerned that the gains (which I imagine should be taxed upon conversion of from Traditional to Roth in Jan 2025) aren't in the math of this tax return. But maybe they'll be taxed on my 2025 tax return since the conversion operation occurred in 2025 (?).