I opened a ROTH IRA and contributed $5,500. I recharacterized to a Traditional IRA (because income limit), then i converted my account to a ROTH. How do I report this?

[stillsj1]

I opened a ROTH IRA and contributed $5,500 in 2018. I then recharacterized my contribution to a Traditional IRA because I exceeded the income limit for a ROTH IRA. I then i converted my account to a ROTH IRA, this was all in 2018. Now and at the time of conversion my account was at a loss for the year, so there were no gains when I did the conversion. How will I report this?

[dmertz]

Was the $5,500 contribution in 2018 a contribution for 2018 or a contribution for 2017?

[stillsj1]

2018

[dmertz]

In 2018 TurboTax, enter the original Roth IRA contribution under Deductions & Credits.  In the follow-up, indicate that you "switched or 'recharacterized'" the contribution to be a traditional IRA contribution instead and that the amount of contribution that you recharacterized was $5,500.  TurboTax will prompt you to enter an explanation statement describing the recharacterization where you'll indicate that you recharacterized your entire $5,500 and an adjusted amount of [whatever the amount was] was transferred to the traditional IRA.  TurboTax will then treat this $5,500 contribution as either a deductible or nondeductible traditional IRA contribution depending on your eligibility for a deduction (or your election to make it nondeductible if otherwise deductible).

Separately, enter the code N 2018 Form 1099-R that you'll be receiving that reports the recharacterization.

Finally, enter the code 2 2018 Form 1099-R that you'll receive that reports the Roth conversion.  Assuming it's the case, indicate that the entire amount was converted to a Roth IRA.

Be sure to click the Continue button on the Your 1099-R Entries page and answer the additional follow-up questions, particularly the one that asks for your December 31, 2018 balance in traditional IRAs.  TurboTax will prepare Form 8606 to calculate the taxable amount of the Roth conversion.

[Hal_Al]

Making a Non-deductible IRA contribution and Converting to Roth IRA

Many people are doing this as a way of getting around the income limit for making a Roth contribution. But this year's contribution cannot be converted in isolation from any existing traditional (including rollover) IRA(s). It's best explained by example. Let's say you have a $95,000 balance in all your existing traditional IRAs and that balance consist of $45,000 in deductible contributions, $10,000 in previous non-deductible contributions and $40,000 in earnings (interest, dividends & capital gains). This year you make a $5000 non-deductible contribution and convert $5000 to a Roth. Only 15% of the $5000 conversion ($750) will be tax free. Your basis, in all your IRAs, is $15,000 (the previous $10,000 of non-deductible contributions plus this year's $5000 contribution). TurboTax will divide that $15,000 basis by the $100,000 balance ($95K+5K) to arrive at the 15% tax free ratio. This is the way the IRS requires it to be done. The calculations will be shown on form 8606.
See: <a rel="nofollow" target="_blank" href="http://www.bankrate.com/finance/retirement/drawback-one-type-roth-conversion.aspx">http://www.bankra...>
<a rel="nofollow" target="_blank" href="http://thefinancebuff.com/how-to-report-backdoor-roth-in-turbotax.html">http://thefinancebuff.com/ho...>

[TaxNoob123]

@dmertz This answer was extremely helpful in filing my 2018 tax return, as OP's situation was identical to mine. I have one additional question. In my state tax return (NJ), Turbotax is asking me to fill out an "IRA Withdrawal" form for the amount written in code 2 2018 Form 1099-R. How should this be handled? I contributed 5500 directly to Roth, recharacterized to tIRA, then converted to Roth, all in FY2018. My code N 1099-R form had $5204 on line 1, and my code 2 1099-R form had $5237 on line 1. Thank you.

[dmertz]

I'm not familiar with the reporting of traditional IRA distributions on NJ tax returns, except that NJ does not allow a deduction for IRA contributions so any IRA distribution reported on a NJ tax return involves a basis calculation.

<a rel="nofollow" target="_blank" href="https://www.state.nj.us/treasury/taxation/pdf/pubs/tgi-ee/git2.pdf">https://www.state.nj.us/treasury...>

If this was your only money in traditional IRAs in 2018, the fact that the traditional IRA was valued at only $5,237 due to investment losses and therefore the conversion was less than the $5,500 contributed means that the conversion should be nontaxable on both your federal and NJ tax returns (assuming that the resulting $5,500 traditional IRA contribution was reported as nondeductible on your federal tax return).

[lei0829]

Hi, I did the samething through Fidelity for my 2020 contribution. The Fidelity guy mentioned that when I use turbotax to report my tax, it will automatically taken care of. I just want to check is that true? is there anything additional I need to do or enter anything?

[Critter-3]

A backdoor Roth IRA allows you to get around income limits by converting a Traditional IRA into a Roth IRA. Contributing directly to a Roth IRA is restricted if your income is beyond certain limits, but there are no income limits for conversions.

Doing a backdoor Roth conversion is a two-step process.

TurboTax Online

TurboTax CD/Download

[Fletcher_tax]

Hi, I am in a similar situation. I put $6000 to a Roth IRA in 2020, and sold the stocks in Roth IRA in 2021 before recharacterizing to traditional IRA and gained $200 interest without paying any capital gain tax. Then I converted all the money including the interest to traditional IRA then to Roth IRA. 

Do I need to pay capital gain tax for the $200 interest? How to operate in Turbo Tax? 

[WendyN2]

Interest earned from the Roth - did you receive a statement from the Investment Company for this? I understand that you converted it all, including the interest, but had the interest incurred or was it categorized as earned? That will make the difference. 

[Fletcher_tax]

I haven't got the statement yet. Will update here when I do.

Sorry, the 200 is the capital gain.  I have $12000 contribution.  When I sold it a few days, I got 12200 back.