Do I need to report on 2017 return or amend 2016 return if I recharacterized a Roth contribution made in March 2016 to a traditional IRA in Feb 2017?More details below.

[markhans1391]

- Roth income limits were exceeded in 2016 so I recharacterized in February 2017 to the traditional IRA

- I did report the Traditional IRA contribution with Form 8606 on my 2016 tax return

- I recently received a 2017 Form 1099-R from Vanguard for the Roth distribution in 2017, so I'm not sure if I need to amend my 2016 return or incorporate the 1099-R into my 2017 return? The distribution code on the 1099-R does show "R"(Recharacterized IRA contribution made for 2016 and recharacterized in 2017). The funds did remain with Vanguard for the recharacterization to the traditional IRA

[dmertz · Accepted solution]

The recharacterization required an explanation statement to be included with your 2016 tax return to explain how your Roth IRA contribution became a traditional IRA contribution, the amount recharacterized and the amount transferred from the Roth IRA to the traditional IRA.  Without this explanation, the IRS may question the reporting of the nondeductible traditional IRA contribution.  At this point I would do anything with your 2016 tax return except retain the details that would be necessary to provide the explanation if the IRS ever questions the From 8606.  Otherwise you can ignore the code R 2017 Form 1099-R.  Entering into 2017 TurboTax will have no effect on your filed tax return.

[markhans1391]

Thanks dmertz! Super helpful!

[town_james]

I had the same issue only TurboTax online told me that i'd have to file an amendment - only I cant find what specifically I should amend.  This Roth --> Traditional IRA was the only thing i could think of.

[dmertz]

2017 TurboTax's statement is meant as a *reminder* that the transaction represented by the 2017 Form 1099-R should have been addressed with your 2016 tax return.  2017 TurboTax doesn't know if you actually *did* already report it with an explanation.

[town_james]

i have been enlightening myself with IRS instructions ... my understanding is that i need to file (1) 8606 detailing the amount of the recharacterized Roth --> trad, and (2) 1040X with the explanation (& supporting document, 2017 1099-R) - does that sound correct?
thanks for the reply!

[dmertz]

If your 2016 tax return did not report the resulting traditional IRA contribution for 2016, either on Form 1040 line 32 or Form 1040A line 17 as a deduction, or on Form 8606 as a nondeductible traditional IRA contribution, yes, you need to amend.  While it might be possible to file just the Form 8606, including Form 1040X gives you way to confirm that there is no change to your 2016 tax liability and gives you a place to put your explanation.

[town_james]

Thanks dmertz - i really appreciate it!

[agent86]

Turbotax should make it more clear in the statement that you DO NOT need to amend your 2016 return to include 1099R (code R) IF that return addressed the outstanding distribution. What a waste of time it was trying to find out. Only after running into problems trying to code the 2017 1099-R (code R) into the ammended 2016 return did I happen on this answer. What a waste of time!  It was another Turbotax wild goose chase.