I ended up contributing to a Roth IRA in 2016, however earned over the income limit. I recharacterized my 2016 Roth IRA contributions to a Non Deductible Traditional IRA for 2016, and then converted the 2016 Non Deductible Traditional IRA contributions to a Roth IRA in 2017. I also set up a backdoor Roth IRA for 2017.
I received a 1099-R in the amount of $5300 ($5000 contributions + $300 earnings) that is entered on line 15a on the 1040.
My question is on the 8606 for 2016: Should the amount for line 1 be the original 2016 employee contributions of $5,000? Or the employee contributions + earnings for a total of $5,300? Or something else?
Thanks for your help!
The earnings required to be transferred with the recharacterization do not go on Form 8606 line 1. They are not part of the amount that was recharacterized. If you contributed $5,000 to a Roth IRA, it grew to $5,300, then recharacterized your entire contribution, $5,000, not $5,300, has been recharacterized. The amount required to be transferred to the traditional IRA, $5,300, is the sum of the $5,000 being recharacterized and the $300 of earnings. In this case, Form 8606 line 1 should show $5,000.
The Form 1099-R reports the amount transferred, not the amount recharacterized. In the case of a code N or R Form 1099-R that has a nonzero box 2a, one can infer that the amount in box 1 minus the amount in box 2a is the amount that was recharacterized.
The earnings required to be transferred with the recharacterization do not go on Form 8606 line 1. They are not part of the amount that was recharacterized. If you contributed $5,000 to a Roth IRA, it grew to $5,300, then recharacterized your entire contribution, $5,000, not $5,300, has been recharacterized. The amount required to be transferred to the traditional IRA, $5,300, is the sum of the $5,000 being recharacterized and the $300 of earnings. In this case, Form 8606 line 1 should show $5,000.
The Form 1099-R reports the amount transferred, not the amount recharacterized. In the case of a code N or R Form 1099-R that has a nonzero box 2a, one can infer that the amount in box 1 minus the amount in box 2a is the amount that was recharacterized.