How to handle 1099-R (2022) when I already filed using Substitute 1099-R (4852) in 2021?

[je105]

Hello Community!

For tax year 2021 I had to recharacterize Roth IRA contributions (done before filing 2021 return) and filed with my 2021 return a substitute 1099-R (form 4852) with the numbers from the brokerage firm.  I received a 1099-R (2022) from the brokerage firm in Jan 2023 and the values closely match the 4852 filed for TY2021, including Gross Distribution, Taxable Amount and Federal Income Tax Withheld.  

My question is what is the correct thing to do with this 1099-R (2022)?  If I add it to my 2022 return it seems like I'm accounting for it twice, since I already included a substitute 1099-R (form 4852) in 2021.  But it doesn't seem right to NOT include it on my return since the brokerage firm reports this 1099-R to the IRS.

I tested adding it to my return (using 2022 TurboTax Deluxe) and it results in a higher refund, but it doesn't seem right.

Can someone advise the right way to handle this 1099-R?  Please let me know if my situation and question aren't clear and I'll try to clarify.

TIA, Jon

[DanaB27]

A Form 1099-R for recharacterization should have code R in box 7 and shouldn't have any income tax withheld. A recharacterized IRA contribution made for 2021 belongs on the 2021 return. But a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned below. Therefore, you do not enter a Form 1099-R with code R. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

If your Form 1099-R doesn't have code R in box 7, can you provide more details on what code is listed in box 7? Does it show taxes withheld?

You should have entered the recharacterization when you enter the 2021 contribution to the Roth IRA on your 2021 tax return:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. 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.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if 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)

[je105]

Hi Dana,

Thanks for the reply and info.  I think rather than 'recharacterize', I should have stated, I reversed the Roth IRA contributions made during 2021 (and Jan 2022).  Also, my apologies for not including the distribution codes.  The Distribution Codes used on the 4852 (filed with 2021) are J, P and the codes on the 1099-R (2022) are the same J, P.

J - Early distribution from a Roth IRA

P - Return of contribution taxable in 2021

I have a second 1099-R (2022) for smaller Roth IRA contributions made in Jan 2022 that were reversed at the same time.  I have included that 1099-R in my 2022 return which makes sense to me since it occurred in TY2022.

Hope this additional information helps.  Let me know if there's anything else I can provide to paint a clearer picture.

Jon

[DanaB27]

Yes, this is a withdrawal of excess contribution plus earnings and not recharacterization. 

Yes, the 2022 Form 1099-R with codes P and J for the 2021 excess contribution plus earnings doesn't have to be entered on your 2022 return since it belongs on your 2021 tax return (which you already reported). The only exception is if there are Box 4 Federal Tax withholdings and/or Box 14 State withholdings. Then you must enter the 2022 Form 1099-R into the 2022 tax return since the withholdings are reported in the year that the tax was withheld. The 2022 code P will not do anything to the 2022 tax return but the withholdings will be applied to 2022.

Yes, the Form 1099-R for the returned excess contribution for 2022 will be entered on your 2022 tax return.

[je105]

Hi Dana,

Thanks for the additional review and feedback.  I DO have a value in Box 4 (Federal Income Tax Withheld) on the 1099-R (2022), but the value matches what was submitted on the substitute 1099-R (4852) in 2021. The brokerage did withhold 10% federal tax when they did their NIA calculation. 

How does the fact that I accounted for Fed tax withheld in my 2021 return affect my 2022 return?

Thanks,

Jon

[DanaB27 · Accepted solution]

When you enter a 2022 Form 1099-R  with codes P and J in your 2021 tax return it will enter the distribution and taxable amount from 2a in Form 1040 but TurboTax will ignore the taxes withheld in box 4. These taxes withheld belong on your 2022 tax return because they were withheld in 2022.

Now when you enter the 2022 Form 1099-R with codes P and J in your 2022 tax return the distribution and taxable amount in 2a get ignored because of the P code and only the taxes withheld in box 4 are applied toward any taxes due (listed on line 25b of Form 1040).

@je105 

[je105]

Hi Dana,

Thank you for the explanation, clarifying how the P and J codes are interpreted for each tax year.  Now it makes sense why I DO include this 1099-R in my 2022 return even though it seems like a duplicate of the 4852 filed in 2021. 🙂 

Thanks again and have a great weekend!

Jon

[kiblet]

Hi Dana - I have the situation with a 2022 Form 1099R with Code "R" in Box 7 for a 2021 ROTH contribution that was recharacterized in early 2022 and notated on 2021 tax return with the explanation of contributions & earnings as you describe.  It was then subsequently backdoor converted back into a ROTH in 2022. 

Just want to confirm that since I accounted for it on my 2021 taxes, I DO NOT need to enter anything into my 2022 tax return using Turbo Tax for the 1099R marked with "R" in Box 7?  Am I understanding your post correctly?

I also have Form 1099R's for 2022 that are the total of our 2021 conversion (earnings taxable as described above) AND our 2022 conversion (no taxable earnings) with a "2" in Box 7 which is adding to my confusion/questions.   Thanks for your input in advance!

[RobertB4444]

If you have already entered all of the information on your 2021 return then there is nothing to enter for 2022.  You're all set.  Save the 1099-R for your records in case there are questions later.

@kiblet