IRA Recharacterization and Conversion

[Outback22]

In the year 2023 I contributed $5000 to my Roth IRA until I realized that my income was now over the limit. Certainly grateful to have this problem.

I have recharacterized my Roth IRA (along with the gains) to traditional IRA, contributed $1500 to the new traditional IRA to max out my 2023 contribution, and converted the traditional IRA to a Roth IRA (backdoor roth). Since I did all this in 2024, I will not be getting a 1099-R.

Am I required to report any of this on my 2023 tax return? If yes, how do I do so in Turbotax?

[DanaB27 · Accepted solution]

Yes, you have to enter the recharacterization and the traditional IRA contribution for 2023 on your 2023 tax return.

You will enter the recharacterization when you enter the contribution to the Roth 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" and  “Roth IRA”
5. Enter the traditional IRA contribution and continue through the interview
6. Answer ‘Yes” on the “Roth IRA Contribution” screen
7. Answer “No” to “Is This a Repayment of a Retirement Distribution
8. Enter the Roth contribution amount 
9. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
10. 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.
11. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" since you are 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)

You will get a 2024 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2023 and this belongs on the 2023 return. But a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the Form 1099-R with code R when you get it in 2025.

You will have a 2023 Form 8606 with a basis on line 14, this will be carried over to the 2024 tax return.