Hi, I have a slightly confusing circumstance, some help would be appreciated.
At the beginning of 2020 I made a $500 contribution into my Roth IRA before I realized I would be over the MAGI limit for 2020. I decided I would do 3 things
1. I would recharacterize the $500 contribution from my Roth IRA to my Traditional IRA
2. I would contribute the remaining $5500 into my Traditional IRA
3. I would convert all $6000 in my Traditional IRA to my Roth IRA to get around the MAGI limit, e.g. a Backdoor Roth IRA.
Now the one thing to note here is I recharacterized my $500 contribution during the March 2020 dip so it ended up being worth $378, so my total conversion for the Backdoor Roth IRA was 5878.
I was provided 2 1099-Rs, one for Traditional and one for Roth. I tried entering these details into Turbo Tax Federal Taxes deductions section, but I think I'm doing something wrong. Here's what I did:
1. "Traditional and Roth IRA Contributions" section under "Retirement and Investments"
Select this
2. Select the kind of IRA(s) you own or contribute to for 2020:
I select both "Traditional" and "Roth" as I've technically contributed to both
3. Is this a repayment of a retirement distribution
No
4. Your total 2020 traditional IRA contributions
5500
5. How much of the above total contribution for 2020 you contributed between Jan 1 2021 - April 15 2021
0
6. Amount switched from a traditional IRA Contribution to a Roth IRA contribution
0, I never recharacterized from traditional to roth
7. Any excess IRA contributions before 2020?
no
8.Any nondeductible contributions to your ira?
no
9. Is this a repayment of a retirement distribution
no
10. Enter your Roth IRA contributions
500, I entered how much I contributed ignoring losses, is this correct?
11. Tell us how much you transferred
378, I entered how much I transferred according to my 1099-R
12. Roth IRA explanation statement
Date of the original contribution 1/16/2020
Date of the Recharacterization 3/25/2020
The Amount Recharacterized: $500
The Amount Transferred (Recharacterization plus earning or losses): $378
The Amount Lossed: $122
13. Did you open a roth IRA before 2020?
yes
14. Let us track your roth IRA basis?
yes
14. Withdraw from your Roth IRA before 2020?
No
15. Enter Prior year roth IRA contributions
8100
16. Did you convert a traditional IRA to Roth IRA before 2020?
No, I started this in 2020, never did it prior
17. Do you have an excess roth contribution for prior years
0
18. Roth IRA value
23,687
19. Income too high to deduct an IRA contribution.
From here it's telling me I put in $122 excess into my IRA and I need to pay taxes on it. This is what I don't understand, I lossed money here, why am I paying taxes on the loss. My expectation would be I would have to pay taxes on any gains. Any help on what I'm doing wrong here would be great.
