Boxes 2a and 2b on 1099R (traditional to roth recharacterization)

[nickh88]

I used after-tax money to contribute to a traditional IRA and then immediately recharacterized that money to a Roth IRA).  Turbotax said "based on your entry in box 7 on your 1099-R, you don't need to pay any extra taxes on the money taken out of this account."  However, turbotax also increased the amount I owed on my taxes by $2000.

Questions:

1. how can box 2a be 6000 if the broker also noted "taxable amount not determined"?

2. How can I note the contribution to my traditional IRA was with post-tax money?

Box 1: 6000

Box 2a: 6000

Box 2b: x (taxable amount not determined)

Box 4: 0

Box 7: 02

IRA/SEP/SIMPLE: x

box 12: 0

Any help is appreciated.  Thank you.

[macuser_22]

That is a distribution - not a recharacterization.

I assume you mean that you made a non-deductible Traditional IRA contribution and the *converted* that (not recharactorized) to a Roth IRA.

When did you made the non-deductible contribution?  Did you enter it into the IRA contribution interview and specify that it is to be non-deductible. (It would appear that you did not).

[dmertz]

The code 2 in box 7 indeed indicates that the transaction being reported on the Form 1099-R is a Roth conversion, not a recharacterization.  (About the only other thing code 2 would be used for when the IRA/SEP/SIMPLE box is marked is an IRS levy, and I think it's safe to assume that this is not reporting an IRS levy.)

[nickh88]

Hi Macuser22,

Thanks for checking this out.

I agree that moving the post-tax money from a traditional IRA to a Roth IRA should be called a conversion.

I made the contribution and conversion on the same day in December 2019.

What do you mean by the IRA contribution interview? Where is that located? 

[nickh88]

Hi @dmertz ,

Yes I agree with the code 2 statement. Why would turbotax say tax is owed on that amount since it was done with post-tax money?

[dmertz]

The taxable amount of a Roth conversion is calculated on Parts I and II of From 5329, taking into account your basis in traditional IRA contributions added when you enter your nondeductible traditional IRA contribution.

The traditional IRA contribution is to be entered under Deductions & Credits -> Retirement and Investments -> Traditional and Roth IRA Contributions.

[Critter · Accepted solution]

A backdoor roth contribution needs to be entered in the program as the situation unfolded ... which means you have to enter the contribution first and then go back and enter the conversion ...

(1)First you must enter your Traditional IRA contributions ....

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

Be SURE to answer the follow up that the are choosing to make this contribution NON-DEDUCTIBLE - if that screen comes up. (DO NOT say that you moved (recharacterized) the money to a Roth) – this is a conversion, not a recharacterization.

(2) Then enter the 1099-R that shows the distribution.

Federal Taxes,
Wages & Income
I’ll choose what I work on (if that screen comes up),,
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

Answer the follow-up questions answer the question that you moved the money to another retirement. The screen will open up with choices of where it was moved. Choose you converted it to Roth IRA.

When asked if you have made any non-deductible contributions say " "yes" if you did then enter the non-deductible contributions made for tax years before 2019.     

Enter the 2018 year end value of your Traditional IRA a "0" (zero) - if it is in fact zero - this tax free Roth conversion will not work if it is not zero.  Enter the 2018 non-deductible contribution here.

The non-deductible amount of your contribution will be subtracted from the taxable amount of the conversion on then 8606 form and enter on line 15a of them 1040 form and a zero taxable amount on line 15b  if you did it right.