IRA partial recharacterization

[Joetaxquestion]

On 2/10/2021 I contributed $6000 to a traditional IRA for the tax year of 2020. I later realized only $2740 of that contribution was tax deductible. So I recharacterized $3260 of the contribution on March 11 to a Roth IRA. In the elapsed time, the IRA had lost money so only $3242.02 actually transferred. The broker says I will not get a 1099-R reporting the recharacterization until 2022, and it will be a 2021 1099-R.  I think I have to report the recharacterization on this year's tax return (2020). How do I do that this year with no 1099-R? Or do I wait until next year to file the information from the 1099-R?

[DanaB27]

Yes, the recharacterization has to be reported on your 2020 tax return.

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

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 “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the traditional IRA contribution amount $6,000
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount $3,260 (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx minus $xxx.xx loss were recharacterized.

[Joetaxquestion]

Thanks! Do I pretend I got an 1099-r and fill in the information in Turbotax this year or do I enter the 1099-r in my 2021 tax return?

[DanaB27 · Accepted solution]

The 1099-R 2021 you will receive in 2022 will have the code R in box 7 and will belong on the 2020 tax return. But a 1099-R with code R will do nothing to your return therefore you do not need to create one. You can only report the recharacterization as mentioned above.

You do not need to enter the 1099-R 2021 with code R on your 2021 return and can ignore it.

@Joetaxquestion 

[Joetaxquestion]

Please forgive me, I'm still a bit confused.

So I can skip anything to do with 1099-R this year? Next year, when I receive 2021 1099-R, I just ignore it? Or do I enter into my 2021 return next year?

[Joetaxquestion]

Oh!  I get it!!

Like you said, the 1099-R with R in Box 7 doesn't affect my tax return! And since the IRS can't tell if I enter it into Turbo Tax or not, because my tax return is unaltered, it makes no difference.  Just because I enter something into turbo tax doesn't mean that it ends up getting sent to the IRS.  When I get the 2021 1099-R in 2022, I just need to remember it belongs in my 2020 tax folder.

Thanks!!!

[DanaB27]

You will not have to enter the 1099-R on the 2020 and also not on the 2021 return because you reported already the recharacterization correctly.