I contributed to Roth IRA for 2020 but noticed that my income exceeds the limit. so, I did Roth IRA->Traditional IRA->Roth IRA on 2021/02. which tax year should I report?

[gilbigdog]

I have those accounts in Fidelity and Traditional IRA balance was 0 before recharacterization and after conversion. I haven't received 1099-R from Fidelity. There is earning from the original contribution to Roth IRA and I include both contribution and earning for recharacterization(R ira -> T ira) and conversion(T ira -> R ira). Both recharacterization and conversion were done mid-Feb 2021.

I haven't chosen a year when doing recharacterization and conversion. The only year I selected is the original contribution year for  Roth IRA as 2020 when doing recharacterization.

[DanaB27 · Accepted solution]

The recharacterization from Roth contribution to traditional contribution will be included on your 2020 tax return.

The conversion from traditional IRA to Roth IRA will be included on your 2021 tax return since it took place in 2021.

You will enter the recharacterization when you enter the contribution to the Roth IRA

1. Login to your TurboTax Account 
2. Click on the Search box on the top 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"

You will get two 1099-R in 2022 for the 2021 tax year.

One 1099-R will be for the conversion from traditional IRA to Roth IRA and will be entered on your 2021 tax return. Please see How do I enter a backdoor Roth IRA conversion? for additional detail how to enter this in your 2021 tax return.

The second 1099-R will be for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and this belongs on the 2020 return. But a 1099-R with code R will do nothing to your return. 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.

[gilbigdog]

I receive the two 1099-R in 2022 and had included the recharacterization on 2020 tax return.

Could you please help me how to include the conversion on 2021 tax return step by step?

[DanaB27 · Accepted solution]

You can ignore the 1099-R with code R since you had already included the recharacterization on your 2020 tax return.

To enter the 1099-R from the Roth conversion: 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “1099-R”
3. Click on “Jump to 1099-R”
4. Click "Continue" and enter the information from your 1099-R
5. 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”
6. On the "Your 1099-R Entries" screen click "continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. Answer the questions about the basis and value

@gilbigdog