On 11/19/2014, I contributed $5500 to my Roth IRA for tax year 2014 that ended up being $3000 too high due to income limits. On 4/13/2015 I had $3000 of my contribution recharacterized as a non-deductible contribution to an existing traditional IRA at the same financial institution.
In my 2014 tax return, I included Form 8606 with $3000 entered on line 1. Line 15a of my form 1040 is blank, but the explanation for line 15a included with my tax return indicates:
- date of original contribution (11/19/2014)
- date of recharacterization (04/13/2015)
- the amount recharacterized ($3000)
- the amount transferred ($3000)
- Reason for the Recharacterization: income too high for 2014
Now I am doing my taxes for 2015 and after entering my form 1099-R, TurboTax says:
It Looks Like You May Need to Amend Your 2014 Return
Here's why: Your 1099-R reports earnings on a contribution you made in 2014. This information needs to go on your 2014 return. If you've already filed your 2014 return, then you'll need to amend it. Here's how.
My question: Do I really need to amend my 2014 return? It looks like the only discrepancy is in my included statement, where I indicated that $3000 was transferred, but it was actually $3136.78. Is there anything else that needs to be updated in my 2014 return?
If your 1099-R has a code "R" in box 7 entering it into your 2014 tax return would have no effect since a code R does not actually do anything. The recharacterization should be entered in to the IRA contributions section (Roth contribution recharactorized to a Traditional IRA).
I believe that you did it properly since any earnings in the Roth will transfer to the Traditional IRA and is not taxable. Only the actual Roth contribution is recharactorized.
All the money in the Roth, including any earnings would be recharactorized to the Traditional IRA.
A return of contribution, on the other hand, would report the earnings in box 2a of the 1099-R which would be taxable income on line 7 of the 2014 1040 form.
No need to amend a do-nothing amended return. If the IRS questions it (doubtful) just answer their letter with the facts - easier than amending.
The characterization must be entered for the tax year that the contribution was made - if in 2015 then it goes on your 2015 tax return, if 2014 and not already reported on the 2014 tax return, then you must amend.
Your add on question does not give any of those facts.