In 2024 I mistakenly put $2000 in a Roth while trying to do a backdoor Roth (I'm not eligible to make a direct contribution) . By the time I noticed my mistake, that $2000 grew to $2309.28. In that same year (2024), I had the $2309.28 recharacterized to a Traditional IRA, and then I did a Roth conversion. Of the converted amount, $2000 is post tax money and $309.28 is investment income.
When I enter the 1099-R in TurboTax, I'm never given me the option to declare a conversion, and form 8606 is never created. On the 1040 where I want line 4a to be $2000 and 4b to be $309.28, TurboTax puts $2309.28 in 4a and $0.00 in 4b.
My Traditional IRA is and always has been $0.00 on 12/31 of each Tax year.
I'm at a loss as what to do and would appreciate some help in getting this right.
Thanks
recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings move but that is ignored.
You must use a trustee-to-trustee transfer before the due date April 15,2025 ( or Oct 15, 2025 if 1040 was timely filed or extended).
You will instruct trustee to calculate the allocable earnings.
report this on your tax return for the year during which the contribution was made.
Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.
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Upon reporting a Trad IRA contribution (non-deductible) of the original amount on your tax return, you can then also report a Roth conversion of the contributed amount for net tax of zero, unless your IRA previously had value exceeding basis.
In that case, it can't be done tax free.
to report a non-deductible contribution, Form 8606 must be attached.
In your case the extra earnings also converted will be taxable.
If you follow the IRS process above, you can toss the 1099-R showing recharacterization into the circular file.
If you enter it you will have to explain to TurboTax what you did.
I guess this is not as simple as I hoped.
I did file an extension.
What is a trustee to trustee transfer?
A bit more info... 1 of the 1099's is a recharacterization from a Roth of 2,309.28 (earnings 309.28), the other is for a properly done backdoor Roth for 6,298.87 (earnings 298.87). If I enter the 2nd one, it works fine... form 8606 is created and I'm taxed on 298.87. As soon as I enter the 1st one, form 8606 disappears and Turbotax wants to charge me tax on 8,608.15.
Thanks for you time and response.
your initial situation is quite simple.
you didn't state you recharacterized one amount but converted a much larger amount.
trustee-to-trustee means you went through the custodian who calculated the earnings.
you can't resolve an excess without the custodian's help. you did that part.
--
" recharacterization from a Roth of 2,309.28 (earnings 309.28),"
This is now a traditional IRA contribution of $2,000. include that amount in your contributions for the year.
As I said above, don't enter that first 1099-R because you are not answering the followup correctly and it is not necessary.
Your Form 8606 basis is going to determine the non-taxable part of your conversion.
I started a new return and entered only the second 1099-R ($6,98.87)... now 1040 lines 4a and 4b look like they should. My problems start If I try to enter the first 1099-R ($2,309.28).
If I understand correctly, I should just ignore the first 1099-R... but if I do that, then how do I get the $2,000 contribution and the $309.28 earnings into the return? If I just add the first 1099-R to the 2nd, and file only one 1099-R, that seems to work (1040 lines 4a and 4b look correct).... but won't the IRS be looking for 2 1099's?
Thanks
" the $309.28 earnings into the return?"
This amount is ignored and does not go on your tax return.
The amount you converted goes on your tax return.
The $2,000 appears on Form 8606 if you elect or are forced non-deductible.
Otherwise, Schedule 1 Line 20.
"won't the IRS be looking for 2 1099's?"
The IRS already has 2 1099-Rs from your custodian.
Thank you.
I just ignored the 1st 1099 and added those $$'s to the 2nd 1099... it looks ok now.
Now I have another issue...
I contributed 7k to my Trad IRA in 2024 and 1k to the same IRA in Jan 2025 also for 2024. I then entered 8k on the screen 'TELL US HOW MUCH YOU CONTRIBUTED'. When I say 1k of the amount was entered between Jan 1 and April 15, my tax increases by $250... which doesn't seen correct.
"I just ignored the 1st 1099 and added those $$'s to the 2nd 1099."
Adding No.1 into No.2 is not ignoring No.1.
Adding No1. Box 1 for inclusion on Line 4a is reasonable. but 4a is then not the amount you converted.
The amount you converted is 1099-R No.2 Box 1. Enter on 8606 Line 8.
If you added $309.28 to be included on Line 4b, that is incorrect.
You should see "taxable amount not determined" on 1099-R No2. In which case 309.28 or any other amount in box 2a is ignored.
Form 8606 determines the amount that goes on Line 4b.
I guess I'm still not understanding this...
This the first 1099 that is the recharacterization...
Box 1 2,309.28
Box 2a 0.00
Bux 2b blank
Box 7 N
IRA/SEP Blank
Here is the 2nd 1099 (the correct backdoor Roth)
Box 1 6,298.87
Box 2a 6,298.87
Bux 2b X
Box 7 2
IRA/SEP X
I'm only showing 1099 #2 on the return and I added Box 1 of the first 1099 to Box 1 of the 2nd... 8,608.15
everything else on the 2nd is the same.
I entered my non-deductible contributions of 8,000 and I entered
a conversion amount of 8,608.15. My 1040 4a and 4b look as I think the should. I think my 8608 looks
ok, although my line 8 is blank, but line 16 seems correct.
Although things look ok (to me), I don't think I'm following what you said. What am I doing wrong??
Thanks again...
The end result is correct. It's that you've left out that code N for the recharacterization on that first 1099-R. But it gets the bottom line correct doing it your way and it should be just fine.
"What am I doing wrong??"
"I entered a conversion amount of 8,608.15. " <--- Wrong.
The amount you converted is on Box 1 of second 1099-R.
"Here is the 2nd 1099 (the correct backdoor Roth)
Box 1 6,298.87"
Also according to the IRS recharacterization instructions
the first 1099-R code N is not correct.
The amount recharacterized was $2,000. That should appear in Box 1. @dmertz
Not surprising you are confused.
The code N Form 1099-R is correct as received. fanfare is incorrect that box 1 of this From 1099-R should have $2,000 in box 1.
Make sure that you are entering each Form 1099-R as a separate Form 1099-R. The fact that entering the code-N 2024 Form 1099-R change anything on Form 8606 suggests that you are somehow combining the forms into one. Make sure that you are clicking the button to add another Form 1099-R to add the second Form 1099-R. The only effect that entering the code-N Form 1099-R properly will have is increase the amount on Form 1040 line 4a by $2,309.28.
Your code-2 2024 Form 1099-R indicates a conversion of only $6,298.87 in 2024, not $8,608.15. Unless there is some other Form 1099-R that reports a conversion of the $2,309.28, these Forms 1099-R together indicate that you still had money in your traditional IRAs at the end of 2024 or that your contributions for 2024 in 2024 totaled only $6,000, not $8,000.
TurboTax has to ask or should ask about the $2,000 which is a Traditional IRA contribution and either deductible or not deductible.
If not-deductible that is going to have an effect on Form 8606.
Note that in a separate post TomDx indicates having performed a completely different contribution and conversion scenario, so none of the details provided seem trustworthy:
TurboTax recognizes a $2,000 traditional IRA contribution through the entry of the original $2,000 Roth IRA contribution and the user indicates that $2,000 was "switched" (recharacterized) to be a traditional IRA contribution instead. This also causes TurboTax to prompt for the entry of the explanation statement required for the recharacterization. Entering the code-N Form 1099-R contributes nothing to the tax return other than producing a corresponding increase in the amount on Form 1099-R line 4a.
Shouldn't I have 3 1099-R's? One for the conversion of the correct backdoor Roth, One for the recharacterization of Roth contribution made in error, and One for the conversion of the recharacterization amount? My Vanguard account says I contributed $8,000 in 2024.
Are you trying to import these 1099-Rs from your broker? You talk about TurboTax entering numbers for you. These need to be manually entered by you. If you decide you want to do it as 3 1099-Rs or 2 that is fine.
But you can't do a backdoor Roth for more than $7000 and you are ignoring good advice from @dmertz above.
Yes, I'm doing all this through Turbotax.
Sorry if I'm not clear.... What I meant is that I only have 2 1099's... one for a distribution (conversion ?) and one for the recharacterization. Shouldn't I have been issued a third for the conversion of the recharacterization? I made $8,000 in contributions and only have $6,000 in distributions... it seems like there is $2,000 missing.
I did $7,000 in 2024 and $1,000 in Jan of 2025... all for 2024. The $2,309.28 recharacterization was done in Sept 2024 (the actual mistake into the Roth was in Feb 2024)... about a week later I converted it, which left 0.00 in my traditional. I knew this was going to screw things up... and I made it worse by making a 2024 contribution in 2025... and then converting it in 2025.
I really appreciate everyone taking time to respond.
Thanks
As indicated by the code-2 2024 Form 1099-R, it seems that in 2024 you converted only $6,298.87 in 2024. Since you made $7,000 of contributions in 2024 for 2024, this seems to imply that your traditional IRA suffered investment losses before the conversion, resulting in $1,701 of your basis in nondeductible traditional IRA contributions being on line 14 of your 2024 Form 8606 to be carried forward to 2025, with only $6,299 of basis being applied to your 2024 conversion.
Since you made $2,000 of your traditional IRA contribution for 2024 by way of a recharacterized Roth IRA contribution, this implies that you made only an additional $5,000 in direct traditional IRA contributions in 2024 for 2024.
The $1,000 contributed in 2025 for 2024 cannot have been converted to Roth in 2024. That conversion, assuming that one will be or already has been done in 2025, will be reportable on your 2025 tax return and will use some of the basis carried forward from 2024 to reduce the taxable amount, probably to zero.
This all would have been better if kept together on a single thread.
The $1,000 contributed in 2025 cannot have been converted in 2024, so would not be included on the code-2 2024 Form 1099-R. If you have done any conversions in 2025, they will be reported on a 2025 Form 1099-R that you will report on your 2025 tax return.
All of the conversions done in 2024 should be combined on an single code-2 2024 Form 1099-R from the IRA custodian if they all were done from the same traditional IRA account.
I see nothing in Pub 590A stating an explanation statement is required for recharacterization.