I became self-employed last year and contributed $4500 to my traditional IRA, $3090 of which I found out was non-deductible so I re-characterized this into my roth IRA. I also opened a SEP IRA last year and contributed money to that as well.
The contributions and re-characterization all happened in 2019. What forms do I need to make sure get filled out in Turbo tax so that the $3090 is tracked as well as the money earned on the $3090 before it was re-characterized?
You will get a 2019 1099-R next year with a code R in box 7 that will require amending 2018 to report the 2018 contribution recharactorized in 2019. You can enter it now and avoid having to amend.
A 2018 1099-R with a code R in box 7 (Recharacterized IRA contribution made for 2017 and recharactorized in 2018) will tell you that you must amend 2017.
A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2017 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 2017 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 2017 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 line 15a explanation statement for a code R 1099-R.
Enter IRA contributions here:
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 2017 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.