@camyz125 wrote:
I had excess ROTH contributions in 2019 due to exceeding income limitations. I recharacterized the contributions to a Traditional IRA before I filed my 2019 taxes. I then converted the money back to the ROTH IRA.
I received a 2020 1099-R for both the Traditional and ROTH IRA's. When I entered them into TurboTax 2020, it noted that I *may* need to amend my 2019 returns.
Do I? Why?
If not already reported in 2019 then you must amend to report it.
A 2020 1099-R with a code R in box 7 (Recharacterized IRA contribution made for 2019 and recharactorized in 2020) will tell you that you must amend 2019.
A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2019 return. It does not get sent to the IRS and nothing goes on the tax return at all. The only purpose of the 1099-R is to report the recharacterization to the IRS, but it still must be reported on your 2019 tax return.
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.
The proper way to report the recharacterization and earnings which is to enter the 2019 IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".
The amount The amount of the original Roth contribution must be entered - not any earnings or losses.
Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.
There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.
That is the only way to prepare and attach the proper explanation statement for a code R 1099-R.
Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.
OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.
Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2019 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
