Overpayment to Roth IRA converted to Trad IRA in 2018. How to report 1099-R?

[megazoic]

Hi. I am trying to figure out how to enter information from a 1099-R (2019) that reports a distribution from a Roth IRA made before April filing of the 2018 tax year. The 1099-R form has box 7 code "R" (Recharacterized IRA contribution made). This step was taken to correct an excess contribution and the proceeds were placed in a traditional IRA before April 15th, 2019.

My Turbotax software suggests that I may need to file an amended 2018 return but I thought taking this step would preclude any additional filing. What is the correct way to report this distribution?

Also, this is money taken from a savings account and is not earned income so I think I should select "Other" when asked about the source of this income. Is that correct?

I am unemployed filing jointly and my wife and I both have IRAs.

Thank you for any help you can provide!

[macuser_22 · Accepted solution]

If you did not report it on your 2018 tax return the  you must amend to report it now.

A 2019 1099-R with a code R in box 7 (Recharacterized IRA contribution made for 2018 and recharactorized in 2019) will tell you that you must amend 2018.

A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2018 return. It does not get sent to the IRS and nothing goes on the tax return at all. The only purpose of the 1099-R is to report the recharacterization to the IRS, but it still must be reported on your 2018 tax return.

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.

The proper way to report the recharacterization and earnings which is to enter the 2018 IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount The amount of the original Roth contribution must be entered - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

That is the only way to prepare and attach the proper explanation statement for a code R 1099-R.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2018 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.

If in 2019 you converted to a Roth then  I assume that you are trying to do a so called "backdoor Roth" so you would want  it to be non-deductible on a  8606 form.

[megazoic]

Thanks for these helpful comments.