I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?
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meredithsu
New Member

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

 
9 Replies
jdmcmah78
New Member

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

Can you please tell me how you filled out the 1099-R? I am in the same situation - but can't figure out where to put what amounts (the 5500 I initially put in for the IRA and the additional 793 in earnings).
dmertz
Level 15

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

If what is now your traditional IRA contribution for 2016 is a nondeductible traditional IRA contribution, your 2016 tax return must include Form 8606 to report the nondeductible contribution.  After entering the Roth IRA contribution and indicating that you recharacterized it to a traditional IRA, TurboTax will automatically prepare Form 8606 Part I to report any nondeductible traditional IRA contribution.

If the contribution ended up as an entirely deductible traditional IRA contribution, the deduction will appear on Form 1040 line 32 or Form 1040A line 17, with no need for Form 8606.

burnsm00
Level 2

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

I see your post is almost two years ago, but did you find a solution? In 2019, I contributed $7k to a Roth that in 2020 (before I filed my 2019 taxes), I recharacterized to a traditional IRA along with $730 of interest.  I know I must fill out a 2019 Form 8606 to report the nondeductible contribution. But, how do I handle the 2020 1099-R (distribution code = R)?   Turbo Tax tells me to amend my 2019 tax return.  When I do this, the impact is a 6% excise tax on the interest. Is this correct?  I cannot find any guidance on how to report the income.  Any help would be greatly appreciated.

dmertz
Level 15

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

The message from 2020 TurboTax is just reminding you that the effect of the recharacterization, a $7,000 traditional IRA contribution, needs to be reflected on your 2019 tax return.  As you said, you'll do that by filing 2019 Form 8606 to report the nondeductible traditional IRA contribution for 2019.  If you also did a traditional IRA distribution or Roth conversion in 2019, the addition of the nondeductible traditional IRA contribution for 2019 might change the taxable amount of that distribution or conversion, requiring Form 1040-X to be filed as well.

 

The $730 of interest transferred to the traditional IRA simply becomes $730 of interest earned in the traditional IRA as if the original contribution had been made to the traditional IRA and the interest had accrued there.   The $730 doesn't appear anywhere in your amendment other than as part of your description of the recharacterization in an explanation statement.  Gains in your traditional IRA aren't taxable until distributed from the traditional IRA.

burnsm00
Level 2

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

Thanks so much!  I have been struggling with this for days now!!!  Your explanation is the first one that makes sense to me.

Since I did not do any of these other things you mention, sounds like I only need to file a 2019 Form 8606. 

  • Can I just send it in with my 2020 return or should I send it in solo? 
  • Also, do I only report $7000 on Form 8606, line 1?  From your explanation, I think that the $730 of interest (that was ostensibly earned on it) should be/will be taxed when I start withdrawals from the Traditional IRA.  It should not be part of my basis, since it has not yet be taxed, unlike the $7000.    
dmertz
Level 15

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

The 2019 Form 8606 must be mailed separately.  If you include Form 1040-X, these would be mailed to the address for your filing area indicated in the instructions for Form 1040-X.  If you mail the Form 8606 stand-alone, the instructions for Form 8606 say to mail it to the same address where you would have mailed your original tax return (had you paper-filed).  I think I would include Form 1040-X and use that as a place to provide explanation of the recharacterization, but either would probably suffice.

burnsm00
Level 2

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

Thanks.  Great suggestion.  However, as to my other question

  • Am I correct in saying the amount I report on line 1 of Form 8606 is $7000?  I know that in my explanation, I would give the total amount (contribution + interest).
dmertz
Level 15

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

Somehow I managed to delete my earlier response to that question.  Yes, only the $7,000 goes on Form 8606 line 1.

burnsm00
Level 2

I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

Thank you again. 

 

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