How to enter a $6000 backdoor Traditional-to-Roth conversion if $2500 was directly contributed to Traditional and $3500 was recharacterized from Roth to Traditional?

[moomba40]

Hello TurboTax community, thanks in advance for your help!  I have scoured the FAQs and have found several articles dealing with backdoor Roth and recharachaterization, but none that quite fit the bill of a backdoor conversion involving a mixture of recharacterized contributions and direct contributions.

In 2022, I was over the income cap for direct Roth contributions so was intending to do a backdoor Roth, as I had done in previous years.  However, I screwed up my auto-investments and accidentally contributed $3500 directly to the Roth account instead of the Traditional account.  When I realized the error, I did a recharacterization of the full $3125 in the account ($3500 minus losses) to the Traditional IRA and received a 1099-R with code N for it.  So after the recharacterization, the Traditional IRA has $3125 in it (3500 minus losses), and I then contributed $2500 directly to the Traditional, bringing total IRA contributions for 2022 to $6000.  I then converted the entire $5789 ($6000 minus losses) from Traditional to Roth and received a 1099-R with code 2 for that "distribution" of $5789.

So I attempted to capture this correctly in TurboTax.  Here is what I did:

1.  I imported both 1099-R's as wages: the code 2 form for the $5789 conversion ($6000 minus losses) and the code N form for the $3125 recharacterization ($3500 minus losses); this gave me $8914 in 2022 income from IRAs.

2.  Under Deductions & Credits, I checked both Traditional IRA and Roth IRA, since I directly contributed to both of the accounts (although the Roth contributions were inadvertent).

TurboTax then led through some questions about the Traditional IRA first.

3.  For the Traditional IRA:
-- I selected "no" to "is this a repayment?"
-- I entered $2500 in the "Tell us how much you contributed," since that was the amount I directly contributed to the Traditional.
-- "No" to "did you change your mind?"
-- "No" to "any excess IRA contributions?"
-- "Yes" to "any nondeductible contributions?" (since my previous years' tax returns contain 8606 forms)
- IRA basis: 0
- Value of Traditional IRAs on Dec 31: 0
- "No" to "is this a repayment?"

Then, TurboTax went directly to questions about the Roth IRA.

4.  For the Roth IRA:
-- I selected "no" to "is this a repayment?"
-- I entered $3500 in the "Tell us how much you contributed," since that was the amount I directly contributed to the Roth (inadvertently).
-- "Yes" to "did you change your mind?"
-- Chose the converted to Roth option
-- Entered "$3500" to "tell us how much you transferred"
-- Wrote a brief "Roth IRA explanation statement" detailing the mistake, correction, and the amounts
-- "Yes" to "let us track your Roth IRA basis"
-- "No" to "withdraw from your Roth IRA before 2022?"
-- Prior year Roth IRA contributions: 0 (all prior years were done correctly through proper backdoor conversions)
-- Selected previous years that I did conversions and the amounts for each year
-- "No" to "any excess Roth contributions?"
-- Income too high to deduct --> Continue
-- Your IRA deduction summary: 0

That takes me back to the main Deductions & Credits screen, and I see $6000 listed under 2022 for Traditional and Roth IRA Contributions.

So this is what I have done, and I was hoping one of the community's tax experts could flag any potential issues.  One of the biggest questions I had was the amount contributed to the Traditional IRA:  should it be $2500 (the amount I directly contributed) or $6000 (the combined contributed amount) or $5789 (direct contributions + recharacaterized amount after losses).  I should note that initially I had $6000 here, but when I then entered $3500 for the Roth contributions, it told me I owed a penalty since I was $3500 over the allowed $6000 IRA contribution limit.  So I figured that I need to put $2500 for Traditional and $3500 for Roth.  But this was not clear in any of the articles or posts that I have read.

Thanks for your assistance!

[DanaB27 · Accepted solution]

Yes, $2,500 will e entered as a direct contribution to the traditional IRA. It seems you entered everything correctly in the IRA contribution section.

[moomba40]

Thank you @DanaB27, much appreciated!