Is a recharacterization amount for 2020 from a Roth in early 2021 to a traditional Ira added to total trad. Ira value as of dec 31 of 2020 On form 8606?

[lg171]

Not clear from interview whether a Roth recharacterization to a trad Ira should be added to what was the total traditional Ira total value as of dec 31 2020.

[dmertz]

The amount recharacterized after December 31 is an "outstanding recharacterization."  On the page that asks for you to Tell Us the Value of Your Traditional IRA, TurboTax asks you to enter the actual year-end balance, the amount of any outstanding rollovers and the amount of any outstanding recharacterizations.  TurboTax then sums these three entries and puts the result on Form 8606 line 6.  Do not sum these entries yourself, let TurboTax do it.

[lg171]

Thanks for your reply.
I had been through the wage & income interview regarding value of traditional Ira and had initially separately entered the recharacterization amount as well as the Ira value at the end of the 2020.  However when I get to the explanatory statement  it reads as if I am recharacterizing to a R oth not to a traditional Ira.  So this makes me think something is wrong.
Next if I go to reductions & credit I can enter both the amount to remain in the Roth contribution and the amount from the Roth that I need to  recharacterize . At the explanatory statement lead in it properly refers to the Roth recharacterization.  But I am not asked about year end value of Ira in this section. 

[dmertz]

Make sure that you have entered the original Roth IRA contribution and then in the follow-up to that you have indicated that you switched from Roth to traditional.  Entering it this way I don't see anything in either the online or the CD/download version that seems to imply a recharacterization from a traditional to Roth.  Do not enter the contribution directly as a traditional IRA contribution.

Also note that the title of the next page, "Tell Us How Much You Transferred" is bogus.  This page is actually asking how much was recharacterized from Roth to traditional, not how much was transferred.

[lg171]

It appears I am not seeing what you are.  I have properly entered the info asked for under deductions and credits area for iras.
Under wage and income area there is another Ira related section. I had a small Ira distribution that correctly shows up here. I entered the info related to my Ira basis, yes I had deductible contributions years ago. It’s here where I entered the trad. Ira value as of dec 31st. It’s also in this section where it asks for a statement for the amount converted to a Roth IRA .  I also noticed that the statement I put in the Ira section in deductions and credits automatically gets added to the statement in the wage and income area!

[DaveF1006]

It depends. What  statement are you referring to where it gets added in the wage and income area. How does it appear in that section?

[dmertz]

I'm not sure what you would have entered regarding a Form 1099-R that would have caused TurboTax to prompt for an explanation statement in that section.  If you entered a code 1, 2 or 7 Form 1099-R with the IRA/SEP/SIMPLE box marked, make sure that box 2a shows the same amount as is in box 1.

[lg171]

So. Under wage and income, retirement plans and ss, Ira ... withdrawals. From here it shows the small RMD Ireceived for 2020. It goes on to ask about my non deductible contributions and basis in my iras which I enter. It asks for me to enter the value of my iras as of the end of 2020. (The total trad. Ira value is needed to figure how much of my distribution is taxable on form 8606.)

It was here my original question was whether my Roth recharacterization  to a trad Ira should be included when I add up my trad iras. I am thinking not.  It also asks about outstanding recharacterizations , I assume this means a recharacterization of an Ira to a Roth,because on the next screen entitled “explain you recharacterization “ it asks about giving the details of a recharacterization  to a Roth. 

My 8606 form looks fine filled out by TurboTax. It even shows the proper amount for the amount of the Ira distribution that is not taxable based on what I entered for my year end trad Ira value.

without putting something in this explanation of recharacterization of a Roth , which never happened ,I cannot get past the final review.  I must have entered  something incorrectly somewhere but I have not yet found it. The tax forms TurboTax has filled out all look fine when I manually check them.

[dmertz]

I suspect that the online version behaves differently than the CD/download version that I am using and that online TurboTax is prompting for an explanation due to the entry of an amount in the box for outstanding recharacterizations.  That prompting at this point would be redundant to the entry under Deductions & Credits where the explanation really should be made.  It doesn't surprise me that the online version does some strange things relative to the CD/download version.

[lg171 · Accepted solution]

I believe I have found an answer to my questions. Turns out due no doubt to answering some question in the IRA interview incorrectly, turbotax checked to see if the taxable amount of my inherited IRA distribution could be reduced.  This led to my questions.  What I ended up doing was to delete a couple of the ira tax worksheets and go through the questions again in Turbotax.  This cleared up the questions I had. 

The 1040 now shows the full taxable amount of the distribution. The 8606 no longer does the taxable calculation for the Inherited IRA distribution ,which had no basis, which is also correct.

Regarding the explanation of my Recharacterization statement showing identically  in 2 different areas  of Turbotax - seems that's the way it works according to who I spoke to in tech support.  In the end none of this duplication shows in the explanatory note for the Recharacterization with my return.

Thanks for replying to my posts and helping me think through this issue.