My 2016 MAGI was too low for the maximum ($6,500) Backdoor Roth IRA contribution. Must I recharacterize some of the converted funds?

[ChristinaS]

Please explain what you mean. A Roth conversion is a distribution from a Traditional IRA. There's no such thing as income too low to have a distribution. Are you entering an IRA contribution when you don't have any earned income? What is the message you are receiving in Turbo Tax which has you thinking you need to do something differently?

[derdlimbrace]

I had a Traditional IRA that distributed its assets to its investors and closed.
The funds were trustee transferred to a new TIRA.
The same day the funds were converted to a new Roth IRA.
I have 1099-R for the TIRA distribution to the Roth.
Turbo Tax said part of my contribution to the Roth IRA is not allowed for two reasons:
1. The contribution is over the $6,500 limit (I’m over 50) and
2. I don’t have enough earned income (my contribution must be equal to or less than my earned income).

I don’t know that I have answered the Turbo Tax questions correctly.
I believe I need to re-characterize some of the Roth contribution.
I don’t know exactly how to enter this into Turbo Tax.
The instructions I received from TurboTax do not exactly fit the format of my updated software so I may enter the date correctly.
How shall I proceed?  
Thank you. Tom

[ChristinaS · Accepted solution]

You didn't make an original contribution to a Roth. So, indicating a Roth contribution is the primary source of the problem you are facing. In fact, it sounds like you didn't make any IRA contributions, and just moved money to different accounts.

Under Federal Taxes- Deductions and Credits- IRA Contributions, keep the Roth box checked and proceed until you can remove the dollar amount indicated as a 2016 contribution. When you convert money from a Traditional IRA to a Roth, that is not treated as a contribution. A conversion is a distribution from one account that you place into another, whereas a contribution means you put "new money" into a Roth. A backdoor Roth is not considered a Roth contribution.

There's never such thing as your MAGI keeping you from having a distribution, but it is a problem with making an IRA contribution. Recharacterizing contributions doesn't get you around the problem of not having enough earned income/ MAGI. So, the resolution is not for you to recharacterize, its that you need to remove all indications of having made a Roth contribution.

When did you make the original Traditional IRA contribution? If you didn't do that in 2016, then there should be no indication of having made any IRA contributions. Based on your comment, I get the sense that no contributions were made in 2016, but that your account just got closed and moved in 2016.

All of that activity is handled under the 1099-R entry area (income)-

• Your 1099-R showing the money going from the rollover IRA to new (Roth) IRA. After entering this, you are asked if you took the money out or rolled into another plan. From here, you will indicated that you converted it to a Roth