Filing backdoor roth IRA

[muchdutch]

Last year, when I realized that I became a high income earner, I stopped contributing to my Roth IRA (about a month after I became a high income earner). I then moved my 2022 excess contributions from my Roth IRA to a traditional IRA in December 2022. I have a 1099-R form for this (code N). In April 2023, I recharacterized all my traditional IRA $ back to my Roth IRA to complete the backdoor Roth IRA process. I have no form for this because it's too recent.

I'm confused how to file this process.
Do I select that I have both a trad and roth IRA on the first page?
Do I have trad IRA contributions? I would think no, because everything that was in my trad IRA came from a Roth contribution.
Do I have Roth IRA contributions? I would say yes, that's all the money I contributed in 2022.
Do I have any nondeductible contributions? I'm not sure... I was told I needed to fill in part 1 of the 8606 form, but how /where do I do that?

Thank you!

[DanaB27]

You will enter the recharacterization when you enter the contribution to the Roth IRA:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “Roth IRA”
6. Answer ‘Yes” on the “Roth IRA Contribution” screen
7. Answer “No” to “Is This a Repayment of a Retirement Distribution
8. Enter the Roth contribution amount 
9. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
10. 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.
11. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" since 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).

Next year on your 2023 tax return you will enter the 2023 Form 1099-R for the conversion:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[fanfare]

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings are ignored.
report this on your tax return for the year during which the contribution was made.

For Roth conversion purposes, you probaby want to make the contribution non-deductible.

 A conversion to Roth, backdoor or otherwise. is not a contribution. Don't enter it as such.

@muchdutch 

[muchdutch]

Thank you! This is really helpful!

Just to confirm:
- I have 2 IRA accounts, a traditional and a Roth. But I should only select the "Roth IRA" account in Traditional and Roth IRA Contributions”.
- I have 1 recharacterization and 1 conversion for tax year 2022
1. Roth IRA>Trad IRA  Dec 2022, w 1099-R form and
2. Trad IRA>Roth IRA same amount, April 2023 no form

but I only file the recharacterization for 2022, and the conversion will be filed in my 2023 tax returns. 

Is that correct?

[fanfare]

That's correct.

@muchdutch 

[fanfare]

whether you make it deductible depends on several factors.

whether you  started with zero in your traditional IRA

whether you are allowed a deduction

whether you had positive earnings moved with your recharacterization

whether you want to be tracking a Form 8606 for the life of the Traditional IRA.

@muchdutch