Is my 1099-R form correct for backdoor roth contribution?

[Lollyw2000]

when I got my 1099R form this year for my traditional IRA account I noticed that my distribution code is ''N'' which indicates a 'recharactorization' instead of code '2'(what I got last year). my advisor says it's still the same as a normal backdoor roth conversion but what I found online indicates they are two different things, conversion vs recharactorization. I want to make sure it wasn't a mistake that I should correct to avoid any penalties and that I can still file my 2024 tax return for the backdoor roth contribution.

[DanaB27]

Code N (indicating recharacterization) is not issued for a Roth IRA conversion. As you mentioned a recharacterization and conversion is not the same. When you make a recharacterization it is like you never made the traditional IRA contribution but instead made a direct Roth IRA contribution.

Right now this Form 1099-R with code N indicates you made a Roth IRA contribution instead of making traditional IRA contribution and then converting it because of the recharacterization. 

If you cannot make Roth contributions because of your income then you will have an excess Roth IRA contribution. Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.

If you requested a conversion instead recharacterization then you need to let your custodian know that they issues an incorrect Form 1099-R. They will need to issue you a corrected Form 1099-R.

If you indeed requested a recharacterization and therefore made a Roth IRA contribution then please see What happens if I made an excess Roth IRA contribution because my modified adjusted gross income is ...

[Lollyw2000]

thanks! that's what I thought too.  my MAGI is too high so I was intended to do the backdoor through IRA conversion. seems it was done incorretcly.

but since my MAGI is too high and likely be the case for 2025, I cannot even apply it as contribution for next year but withdraw this.

If I have this amount withdrawn before tax filing deadline, how can I report this correctly on Turbo Tax to avoid the penalty? since I probably wont get a tax form for this activity until next year? all I have now is this distribution code N form indicating the 'recharactorization'.

[DanaB27]

Yes, you can withdraw the excess Roth IRA contribution plus earnings by the due date .

To report the recharacterization on your 2024 return and remove the penalty:

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 ‘Yes” on the “Traditional IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the IRA contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Traditional To a Roth IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. 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.
10. Continue until the penalty screen and enter the excess contribution amount withdrawn by the due date.

If you made an excess contribution in 2024 and withdrew the 2024 excess Roth IRA contribution plus earnings in 2025 before the due date, then you will get a 2025 Form 1099-R in 2026 with codes P and J. This 1099-R will have to be included on your 2024 tax return and you have two options:  

• You can wait until you receive the 2025 Form 1099-R in 2026 and amend your 2024 return or
• You can report it now in your 2024 return and ignore the 1099-R when it comes unless there is Box 4 Federal Tax withholding and/or Box 14 State withholding. Then you must enter the 2025 Form 1099-R into the 2025 tax return since the withholdings are reported in the year that the tax was withheld. The 2025 code P will not do anything to the 2025 tax return income but the withholdings will be applied to 2025.

To create a Form 1099-R in your 2024 return please follow the steps below:

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Answer "Yes" to "Did you get a 1099-R in 2024?"
5. Select "I'll type it in myself"
6. Box 1 enter total distribution (contribution plus earning)
7. Box 2a enter the earnings
8. Box 7 enter J and P
9. Click "Continue"
10. On "Is the IRA/SEP/SIMPLE box on this 1099-R checked?" screen answer "No, the box is blank"?
11. On the "Which year on Form 1099-R" screen say that this is a 2025 Form 1099-R.
12. Click "Continue" after all 1099-R are entered and answer all the questions.
13. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Corrective distributions made before the due date of the return".

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2023" but you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2024.