Can someone with a CPA certification, please help me with IRA conversion tax issues?

[klfick]

My IRA was converted to a Roth to take advantage of the Federal solar rebate, the solar plan fell through and I called to convert it back to a Traditional so I wouldn't be taxed on it. The 1099R I received taxed the total amount even though it was changed back. What do I need to do to get back the taxes that I paid. My 2018 1099R only showed that it was converted back. I have not received a credit.

[mesquitebean]

I don't know about CPA certification, but I know someone familiar with that topic who can explain that situation to you.  I'll ask them to look at your thread.   In the meantime, it's also possible someone else may respond in this thread.

@dmertz  Are you please able to explain this user's situation when you are next in the forum?  Thanks.

[dmertz]

In what year did you perform the Roth conversion?
What is the code in box 7 of the Form 1099-R for that year that reports this conversion?
Is the IRA/SEP/SIMPLE box marked?
Is a nonzero amount shown in box 4?

Do you have a separate Form 1099-R for the recharacterization?
If so,  what is the code in box 7 of that Form 1099-R (code N or code R)?
Is the IRA/SEP/SIMPLE box marked?
Is a nonzero amount shown in box 4?

[klfick]

My 2017 (the year I recharacterized from Traditional to Roth) shows that I had a gross distribution of $89,598.78 and a taxable amount of $89,598.78. Box 7 shows 7 and the IRA/SEP/SIMPLE box is checked. Box 4 has no amount. Both the 2b Taxable amount not determined and Total distribution boxes are checked.

I recharacterized the IRA January of 2018 back from Roth to Traditional so as not to have to pay the taxes. I had to pay the taxes because that is what it said on my 1099R, but I thought that it would all be cleared up the following year (2018). Instead, all it shows is the following:

My 2018 1099R shows a gross distribution of $92,237.77 and taxable amount of $0. Box 7 shows R and the total distribution box is checked. Nothing else is shown.

Even though I paid the taxes, the recharacterization back to Traditional was done. So not only did I pay the taxes, but I have a Traditional IRA and would have to pay again to change to Roth or cash out.

Please advise. Thank you very much!

[dmertz · Accepted solution]

Your recharacterization was reportable with your 2017 tax return.  To do that you should have edited the code 7 2017 Form 1099-R, indicated the you converted the entire amount to Roth, then on the next page, you should have indicated that you moved some or all of the money back to a traditional IRA, then indicated that you recharacterized the entire amount.  Then after clicking the Continue button on the Your 1099-R entries page, TurboTax would have eventually asked you to provide an explanation statement where you would have indicated that you had the entire $89,598.78 that you originally converted recharacterized back to the traditional IRA, resulting in a gain-adjusted transfer of $92,237.77 to the traditional IRA.  This would have resulted in the original conversion NOT being included in taxable income on your 2017 tax return.  The $89,598.78 would have been excluded from 2017 Form 1040 line 15b.

If you did not already do this on your 2017 tax return, you must amend your 2017 tax return to correct it in the manner.  Amending will get you a refund of the tax you paid on the conversion not previously reported as recharacterized. 

You can ignore the code R 2018 Form 1099-R since it is covered by the explanation statement that you provided with your 2017 tax return or the explanation statement that you will provide with the amendment of your 2017 tax return.

[klfick]

I did indicate that the IRA was recharacterized on my 2017 return and indicated that the total amount was returned to Traditional. I did not change the code 7 on Form 1099R. Oh, I see what I did. It shows that the taxable amount was only $9,312. I forgot that my husband cashed in the IRA that I had in his name. Totally, my mistake. It confused me when TurboTax told me that I had to redo my 2017 taxes. It was probably because of the code R on my 2018 1099R. Thank you for your help. I appreciate it very much. K

[dmertz]

Resolved in the comments.