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Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

Tl;dr:
1st 1099 R (ROTH): Gross distribution : 4,593.61 , Taxable amount : 0
2nd 1099R (Traditional IRA): Gross distribution : 2,534.83 , Taxable amount : 2,534.83
3rd 1099R (Traditional IRA) : Gross distribution : 1,866.20 , taxable amount : 1,866.20
Since I recharacterized it in jan 2021 before filling my return for 2020. 

How should I report this ? or do I really need to file an amendment?

I mistakenly put in money in my ROTH IRA in 2020 and apparently I cannot since my AGA is more than 130K.
Then fidelity advised me to recharacterize it to avoid penalty.
I never took money out in my bank account, just moved it from Roth IRA->traditional IRA -> Roth IRA pretty quickly.
I also reported this in turbo tax while filling 2020 taxes.

Here is what the recharacterization letter says:
Based on your request to recharacterize $3,800.00 and applicable IRS regulations pertaining to IRA recharacterizations, the total applicable earnings or loss for the computation period was $728.11 and the total amount recharacterized was $4,531.15. The amount of the recharacterization reported on your next statement and tax forms issued next January (Form 5498 and Form 1099-R) may be slightly different than this calculation due to intra-day price fluctuations of the securities recharacterized.

  1. Did fidelity send me a wrong 1099R?

  2. Why my last two 1099 R say that my taxable amount is 2,534.83+1,866.20 as I never took out any money?

  3. my 8606 for 2020 1040 shows $3,800 in line 1 , 0 in line 2 and $3800 in line 14

 

Can anyone help me? I am willing to pay. Thanks

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8 Replies
DanaB27
Employee Tax Expert

Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

I assume the first 1099-R has code R for the recharacterization. You stated that you reported the recharacterization on your 2020 tax return and it seems your 2020 Form 8606 is filled out correctly. a Form 1099-R with code R will do nothing to your return. You can only report it in the IRA contribution interview, which you did. Therefore, you can ignore the Form 1099-R with code R.

 

Generally, Roth conversions are taxable unless you made nondeductible contributions.

 

 

Please follow these steps to enter the conversion and your basis from your 2020 Form 8606:

 

  1. Click on "Search" on the top right and type “1099-R”  
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA
  5. On the "Review your 1099-R info" screen click "Add 1099-R" and enter the information from your 1099-R
  6. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA
  7. On the "Review your 1099-R info" screen click "continue"
  8. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  9. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

 

 

Please be aware that the whole distribution will show as income in TurboTax on the summary screen which shows gross income, not taxable income. You can verify your entry on Form 1040, line 4b (taxable amount) should have only the earnings as taxable (unless you had other pre-tax funds in the traditional, SEP, SIMPLE IRAs then the pro-rate rule would apply).

 

To preview Form 1040:

 

  1. Click on "Tax Tools" in the left menu
  2. Click "Tools"
  3. Click "View Tax Summary" in the Tool Center window
  4. Click on "Preview my 1040" on the left

 

 

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Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

Thanks for your response :
To answer to your codes, the first 1099 R has a code R .
the second form has these codes :
section 7 (distribution code): 2 
IRA/SEP/SIMPLE  : X 

Third form :
section 7 (distribution code):  2K 
IRA/SEP/SIMPLE  : X 

What should I enter here to the following questions ? 

1)Any Nondeductible Contributions to Your IRA?
2)Tell Us the Value of Your Traditional IRA ? 
3)After this question , I am not getting the question where it asks Tell us if you moved the money through a rollover or conversion”  
4)How do I know if I had any nondeductible contributions in prior years ? 

DanaB27
Employee Tax Expert

Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

1) Yes, you made nondeductible contributions since you have a basis listed on your 2020 Form 8606 line 14 ($3,800).

 

2) You can find the value on your end-of-the-year statement.

 

3) You are in the retirement section, correct? You should get the questions about the conversion after you enter the first Form 1099-R (before getting the questions about the nondeductible contributions and value). Then when you enter your second Form 1099-R you should get the question about the conversion again.

 

 

 

4) You will have to check your records but you filed the 2020 Form 8606 with a $3,800 basis so you made a nondeductible contribution in 2020.

 

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Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

Thanks for the response.

When I submit my first 1099R in turbo tax, it says that I need to file an amendment for 2020.
Why is it saying that ?

DanaB27
Employee Tax Expert

Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

The 2021 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and this belongs on the 2020 return. But a Form 1099-R with code R will do nothing to your return. You can only report the recharacterization in the IRA contribution section above. Therefore, you can ignore the Form 1099-R with code R and do not need to amend your 2020 return.

 

@taxespain007

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Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

Thank you.
But I am not sure why turbo tax asks me to amend it  ? 

Another question. 
I am not eligible to contribute to Roth and I got to know late both for 2020 and 2021 until I stopped it. 
But in the process , I contributed $800 to roth, but I recharacterized it too. 
Where in turbo tax, do I mention this ? 

KREC
Level 3

Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

A few questions regarding Roth recharacterization . What do you mean by “the code R on 1099 will do nothing on your return”? Also if the form 1099 R has say 2021 in the upper right corner,  I assume it is reportable on the 2021 8606, not a later year?

 

Thank you

MarilynG1
Employee Tax Expert

Got three 1099 R after I recharacterized last year and now I have been asked to file an amendment and pay more taxes.

If you received a 1099-R with a Code R in Box 7, this means 'Recharacterized IRA contribution made for 2022 and recharacterized in 2023'.

 

Yes, you can enter it on an Amended 2022 return for correcting the Form 8606, but it won't affect your return, even though there may be an amount in Box 1.  

 

Here's more info on Box 7 Codes on Form 1099-R and Conversion and Recharacterization

 

@KREC 

 

 

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