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jcr7
Returning Member

posted question 17 hours ago but prompts for Enterprise SSO Corporate User ID

I posted a question to this forum 17 hours ago. When submitted it said it would send an email. I never saw an email and checked my mail server logs didn't see an email either.

The posting can be found via the search:

https://ttlc.intuit.com/questions/5883708-how-to-get-ira-taxable-amount-to-zero-recharacterized-roth...

 

But clicking on it gives a prompt for "Enterprise SSO Corporate User ID". I assume that is an employee login.

 

How long does it take? How do I get that question activated?

 

(My preview shows an IRA taxable amount but it was a non-deductible Traditional IRA that I already paid income tax on last year and had no earnings, but actually had losses, when I converted to Roth.)

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3 Replies
DanaB27
Expert Alumni

posted question 17 hours ago but prompts for Enterprise SSO Corporate User ID

The Form 1099-Rs with code R can be ignored since they don't make any changes to your return. You can only report recharacterizations in the IRA contribution interview and you seemed to have done that on your 2021 tax return. You should have a $6,000 basis on line 13 of your and your wife's 2021 Form 8606. This basis will be entered on your 2022 tax return (and appears on line 2 of the 2022 Form 8606).

 

The earnings in the recharacterization are not taxable income in 2021.

 

If your traditional/SEP/SIMPLE IRAs were empty on December 31, 2022, then you should not have any taxable amount on line 4b since you converted less than the basis. 

 

Please be aware, you had pre-tax funds in your traditional IRA now the pro-rata rule applies. This means that with each distribution/ conversion, you will have a taxable and nontaxable part. 

 

Please review the instructions to enter your conversion:

 

  1. Click "Federal Taxes" on the top and select "Wages & Income"
  2. Click "I'll choose what to work on"
  3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)
  4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
  5. Click "I'll Type it Myself"
  6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
  7. Click "Continue" and enter the information from your 1099-R
  8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account
  9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
  10. Repeat for the other Form 1099-Rs and make sure you select who the Form belongs to.
  11. On the "Your 1099-R Entries" screen click "continue"
  12. Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
  13. Answer the questions about the basis from line 14 of your 2021 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

 

@jcr7 

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jcr7
Returning Member

posted question 17 hours ago but prompts for Enterprise SSO Corporate User ID

Thank you for the response which seems to indicate you saw my original posting which i still cannot read (need some corporate login).

 

In regards to "pre-tax funds in your traditional IRA".  For the three recharacterizations, I created a two new  Traditional IRA accounts but for the third I reused an existing Rollover IRA account. After the conversions to Roth the two new IRA accounts were empty $0 but the Rollover IRA account had its existing funds.

 

Thank you for the link: "The pro-rata rule dictates that when an IRA contains both nondeductible and deductible funds, each dollar withdrawn (or converted) from the IRA will contain a percentage of tax-free and taxable funds."  I forgot about this.  So now I have a single Schwab account with before-tax and after-tax mixed in it.  Any ideas how I can fix this? I guess it is fine if I ignore that. I had stopped depositing to it few years ago as was only using Roth IRA account there instead.

 

As for my 2022 tax return still being worked on, the preview showed  #4a IRA distributions $11,859  and #4b taxable amount $3787 and Schedule 1 #20 IRA deduction is blank.  Where can I see where the $3787  and its $8072 difference calculated? In particular two of the conversions came from IRA accounts with only after-tax dollars.  How did any of this get reflected into my Turbotax entered data?  Is there a way in Turbotax preview to see more forms?

 

I will read carefully your linked docs and steps again to compare with what I have done. Thanks again.

DanaB27
Expert Alumni

posted question 17 hours ago but prompts for Enterprise SSO Corporate User ID

As far as the IRS is concerned all traditional/SEP/SIMPLE IRAs are one account even if you have multiple accounts in your name. You will need to enter the value of all of your traditional/SEP/SIMPLE IRAs and the value of all of your wife's traditional/SEP/SIMPLE IRAs. 

 

Yes, it seems the pro-rata rule applies to you since you had pre-tax funds. The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty.  If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.

 

@jcr7 

 

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