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Level 2
posted Feb 11, 2023 6:11:57 AM

Made traditional IRA contribution in 2022; recharacterized to Roth contribution in 2023

Hi, I made a traditional IRA contribution in 2022. Last month, I realized it wouldn't be deductible so I requested that Schwab recharacterize it to a Roth contribution. They did so. How do I enter this on the TurboTax desktop app? And should I expect any forms from Schwab?

 

If I enter a Roth contribution on TurboTax, it asks if I recharacterized, but it doesn't give that option when entering a traditional contribution.

 

Thanks!

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1 Replies
Expert Alumni
Feb 11, 2023 6:20:32 AM

You will enter the recharacterization when you enter the contribution to the traditional IRA. Do not enter a Roth contribution. You might have to delete your entries first by unchecking both traditional and Roth IRA, clicking continue and then confirm the deletion.

 

  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 contribution amount
  7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
  8. 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.

You will get Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2022 and this belongs on the 2022 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 2024. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

 

[Edited 2/11/2023 | 6:23am PST]

@imnion