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New Member
posted Mar 31, 2021 10:16:05 PM

Can i convert roth contributions in 2020 to traditional before i file taxes to decrease income taxed?

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2 Replies
Employee Tax Expert
Apr 1, 2021 8:05:54 AM

Yes, you can convert your Roth IRA to Traditional IRA.

Contributions to a traditional individual retirement account can be tax-deductible in the year you make them. Different IRS rules on IRA contributions apply to differing situations. However,

  • You can generally deduct the full amount of an IRA contribution if you and your spouse aren't covered by retirement plans at work.
  • If you and your spouse are covered, your contribution might be limited based on your adjusted gross income.

IRA Deduction Limits

Alumni
Apr 1, 2021 8:28:18 AM

You do not "convert" you ask the financial institution that holds the Roth to "recharacterize" the 2020 Roth contribution to a Traditional IRA as if the Roth contribution never happened.   You have until May 17 to do that (or Oct 15 if you file for an extension to file).

 


The proper way to report the recharacterization and earnings which is to enter the 2020 Roth 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.

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 2020 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.