contributed to roth in 2023, recharacterized with profits in 2024, backdoored back in 2024

[taxcurious2]

I'm completely baffled how to enter all this in turbo tax.

1. In 2023 I contributed $6500 to a Roth Ira -- and i made it nondeductible claiming the $6500 basis.

2. At the start of 2024 (long before April 15) I realized my income limits would not let me do the Roth, so I recharacterized the $6500 plus the $1500 growth ($8000 in total) to my traditional IRA.

(I got a 1099R with the roth account  number for this  $8000 with distribution code R)

3. Then one day later in 2024 I converted the $8000 back to Roth from the traditional

(I got a 1099R for the traditional account for the $8000 with distribution code 2).  This is the backdoor thing.

From a big picture point of view, I figure I should pay tax on the growth (the $1500)  in 2024
because had I simply put the $6500  in  in 2023 and then converted $8000 out in 2024 that's what would happen.
However,  I have no idea how to tell TurboTax all this happened, or what parts TurboTax needs to know about.
Any help is welcome.

[DanaB27]

On your 2023 return you should have reported the recharacterization form Roth IRA to traditional IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount of $6,500
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $6,500 (no earnings or losses) on the next screen.
9. TurboTax will ask for an explanation statement where it should be stated that the original $6,500 plus $1,500 earnings were recharacterized.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" since you are doing a backdoor Roth. (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

 Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the Form 1099-R with code R.

You should have a 2023 Form 8606 with a $6,500 basis on line 14. And you will enter this basis on your 2024 return when you enter the Form 1099-R for the conversion:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[taxcurious2]

Thank you very much for the detail answer but I'm confused.

>> On your 2023 return you should have reported the recharacterization form Roth IRA to traditional IRA:

I only recharacterized in 2024 as I realized that I couldn't do the Roth IRA in 2023.  Do I have to file an amended return for 2023 then?

[ThomasM125]

Yes. I assume the recharacterization of the $6,500 plus the $1,500 of earnings was to apply to 2023, since that is the year you had made an excess contribution to the Roth IRA. So you would need to amend the 2023 tax return to report that, unless you had reported that on that return when you filed it.

[fanfare]

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings move but that is ignored.
You must use a trustee-to-trustee transfer before the due date April 15,2025 ( or Oct 15, 2025 if 1040 was timely filed or extended).
You will instruct trustee to calculate the allocable earnings.

report this on your tax return for the year during which the contribution was made.
Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.

===

since the 2024 Roth contribution was $6500,

the contribution to the second IRA is $6500, which can be elected non-deductuble.

An earning of $1500, which you also converted , is taxable.

@taxcurious2 

[batoncookie]

Would this backdoor count as a traditional IRA contribution for 2024? I'm wondering if I need to put the $6500 that was recharacterized into the Traditional IRA contributions section when preparing my taxes for 2024. I did the same thing as the @taxcurious2  except I already reported the excess contributions in my 2023 tax form. I didn't make any additional traditional IRA contributions in the 2024 year.

[DanaB27]

No, if you recharacterized a Roth IRA contribution for 2023 as a traditional IRA contribution then this should have been reported on your 2023 return. If chose to make this contribution nondeductible or it was automatically nondeductible because of your income and a retirement plan at work, then you should have a 2023 Form 8606 with a basis on line 14. This will have to be entered on your 2024 return when you report the conversion.

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2023 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

Please note if you do not get the question "Any nondeductible Contributions to your IRA?" then please see Why am I unable to report my 2023 for 8606 basis?

@batoncookie 

[fanfare]

The proper way to file Form 8606 is attached to Form 1040-X.
Form 8606 can be mailed by itself only when you are otherwise not required to file a tax return.

Do you have the correct taxable amount on Form 1040 Line 4b and did not take a deduction? (Schedule 1 Line 20)?
If that is all true then only Form 8606 has to be attached.
After you e-File,
get Form 1040-X from IRS website and mail it in with your 2023 Form 8606, which you can also get in fillable PDF.
Note: when you are not changing any dollar amounts on your amending 1040-X, you can leave all the lines 1-23 EMPTY.

Part II explanation: "didn't include Form 8606 with e-File".
You will have to mail it so this does not use up your 1040-X e-File.
Done this way, you sign 1040-X, not 8606.

Do not include your old 1040 nor your revised 1040 because they are identical.

Note: some have reported success e-Filing a 2023 1040-X now in 2025.

Others have reported difficulty getting amendments via TurboTax to work.