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SUPREME-GASOLINE
New Member

How do I document a Roth conversion/recharacterization that may have been incorrectly reported on 2017 tax return?

In 2017 I made a tax year 2016 $5500 nondeductible traditional IRA contribution. Later in 2017 I converted that contribution to a Roth IRA. In December 2017 I recharacterization the appreciated amount back to a Traditional IRA in my Fidelity account that didn't post/complete until January 2018.

When I filed my 2017 returns, I did not report the Roth conversion on form 8606 because I thought the re-characterization would have counted for tax year 2017. Fidelity later sent me a 1099-R form for the recharacterization for 2018. I have inputted this form in Turbotax for my 2018 taxes, but haven't filed yet.

Question 1: Did I correctly report this on tax form 8606 for tax year 2017? Based on the fact that I received the 1099-R for 2018 I think the answer is "no"

Question 2:  If I did indeed incorrectly report this in 2017, do I have to amend my 2017 return?  Wouldn't form 8606 be accurate because ultimately the amount was re-characterized so the conversion is null and void?

Question 3: How do I determine my correct basis for nondeductible contributions for tax year 2018?
1 Reply
hbl3973
Level 8

How do I document a Roth conversion/recharacterization that may have been incorrectly reported on 2017 tax return?

You should carefully read page 4 of the instructions for Form 8606 ( https://www.irs.gov/pub/irs-prior/i8606--2017.pdf ) which tells in example (2) how to go about this. From my reading, you did everything right in 2017 except for attaching the statement to your return.  If, as I assume, your 2016 year 8606 basis was augmented with the original nondeductible contribution, then the basis stays the same modulo any new tax year 2017 contributions.  For 2018 you simply add the basis of any new nondeductible contributions.

As to your 2018 return, I would report the 1099-R in box 4a and not include it in box 4b of your 2018 Form 1040.  I would also attach a statement to your 2018 return explaining the above transactions.




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