Late Backdoor Roth IRA recharacterization/conversion

Forum|Forum|3 years ago
August 23, 2023
16 replies
132 views

Trying to figure out how to handle this situation from 2021/2022.

I contributed $4,200 to my Roth IRA at the end of 2021. However, I realized that I made over the limit to contribute to a Roth IRA, so in March 2022 I recharacterized it (now worth $3,600) into a Traditional IRA, and then converted that back into the Roth IRA (i.e. backdoor Roth). The problem is, my broker did not issue me a 1099-R for 2021. So in 2022, I did a regular backdoor Roth for $6,000, but now my 1099-R for 2022 shows $9,600! (conversion amount for 2021 + 2022). Also, I now have a 2022 1099-R for my Roth IRA showing a gross distribution of $3,600 as distribution code R.

How do I fix this? Should I go back and amend my 2021 tax returns? I tried doing this through TurboTax (I filed myself there in 2021), but it asks Did you get a 1099-R in 2021? Since I didn't, I hit No and can't go through the process. Should I select Yes even though my broker didn't give me a 1099-R for 2021?

TurboTax Premier Online

Best answer by dmertz

Expert Reviewed

"The problem is, my broker did not issue me a 1099-R for 2021. "

That's not a problem. You made no distributions in 2021. Both of the Roth conversions performed in 2022 are reportable on your 2022 tax return, not on your 2021 tax return, by entering into TurboTax the $9,600 2022 Form 1099-R and indicating that the entire $9,600 was converted to Roth. Your 2021 form 8606 should have only reported on Part I the nondeductible traditional IRA contribution that resulted from the recharacterization. Your 2022 Form 8606 will show on line 1 the $6,000 contribution for 2022 and on line 2 the $4,200 (not $3,600 that I originally typed) carried forward from line 14 of the 2021 Form 8606.

There is no need to enter the code-R From 1099-R. That should have been reflected in the recharacterization explanation required with your 2021 tax return.

fanfare

Level 15

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings are ignored.
report this on your tax return for the year during which the contribution was made.

So yes, you have to amend 2021, showing a Traditional IRA contribution of $4,200, which should be elected as non-deductible. Attach 2021 Form 8606.

fanfare

Level 15

Do you have the correct taxable amount on 2021 Line 4b and did not take a deduction?
After you e-File,
get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.
Note: since you are not changing any dollar amounts on your amended tax return, you can leave all the 1040-X lines 1-23 EMPTY.

In Part III, you can explain your recharacterization. Include dates and amounts.

@gmcadams

dmertzAnswer

Level 15

Expert Reviewed

"The problem is, my broker did not issue me a 1099-R for 2021. "

There is no need to enter the code-R From 1099-R. That should have been reflected in the recharacterization explanation required with your 2021 tax return.

gmcadamsAuthor

Level 2

@dmertz Should the 2021 Form 8606 (and line 2 for 2022 Form 8606) show the full original amount that was original contributed to the Roth IRA ($4,200) or the amount that it was worth at the time of recharacterization ($3,600)?