excess ROTH contributions in 2019 and 2020

[jltt]

In 2019 and 2020 I made excess ROTH contributions. See the table below.. How should this be reported on my 2020 and 2021 trx returns?

In 2020 I made $1,385 in excess ROTH IRA Contributions. Then I recharacterized the entire amount as an IRA contribution ($1,669.57 was transferred from my ROTH to IRA and it is nondeductible).

Year	Type	Amount	Reported
2014	nondeductible IRA contribution	1,613	Form 8606
2014	nondeductible IRA contribution	1,817	Form 8606
2019	excess ROTH IRA contribution	6,000	Reported as 6,000 and then removed 6,000 (had a loss so only 4,812.86 was withdrawn on 4/6/2020)
2020	excess ROTH IRA contribution	1,385	Reported 1,385 as recharacterized (1,669.57 transferred from ROTH to IRA in 2021, considered nondeductible IRA)
2021	Received 1099-R	1,669.57	TT says I need to amend my 2020 return, how do I report this?

Questions

1. When I look at the worksheets in TT, it lists my IRA contribution for 2020 as 1,385 (line 2 on the IRA contributions worksheet) and uses this amount to calculate my IRA basis. Is that correct? Why isn't it the 1669.57 that actually went into my IRA?

2. For Form 8606 it lists my nondeductible contribution to IRA for 2020 as 1,385. Is that correct? 

3. Does the 1669.57 that was removed from my ROTH affect my ROTH basis? So now I should keep track of my ROTH basis? Or does it not count since it was a recharacterization?

4. In 2019 I had an excess ROTH contribution of 6,000 but I removed the amount (it was a loss). For 2020 when asked about excess contributions in prior years do I enter 0? 

5. How do I amend my 2020 return to report the 1099-R I received?

Thank you!

[DanaB27 · Accepted solution]

1. Yes, that is correct the contribution was recharacterized and only the contribution part will be the basis. The earnings are deemed to have been earned in the traditional IRA.

2. Yes, Form 8606 lists your nondeductible contribution to IRA for 2020 as 1,385 correctly. 

3. Recharacterization means that you pretend that the contribution was made to the traditional IRA and never to the Roth IRA. Therefore, the $1,385 contribution to the Roth (that was recharacterized) isn't part of your Roth basis. 

4. Yes, since you removed the excess contribution you will enter $0 for 2020 when asked about excess contributions in prior years.

5. If the 1099-R has code R then you will not need to amend your 2020 return if you reported the recharacterization with the steps below.  A 1099-R with code R will do nothing to your return. You can only report it as mentioned below. Therefore, you can ignore the 1099-R with code R.

You will enter the recharacterization when you enter the contribution to the Roth 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 “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about 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)

[jltt]

Thanks! Based on your answers, I need to amend my 2020 tax return. Am I able to e-file the amendment using turbotax? I get an error message about my signature date.

[DanaB27]

Yes, if you didn't enter the recharacterization with the steps above then you will need to amend your 2020 tax return.

No, you won't be able to e-file your 2020 amended return. The IRS allows it but unfortunately TurboTax isn't capable to e-file prior year amended returns. Please print and mail your 2020 amended return.