I exceeded the income limits for a Roth IRA in 2016, so in January 2017 I recharacterized those contributions into a Traditional IRA. Do I file Form 8606 now with my 2016 taxes or later with my 2017 taxes?

[jdmcmah78]

Can you please tell me how you filled out the 1099-R? I am in the same situation - but can't figure out where to put what amounts (the 5500 I initially put in for the IRA and the additional 793 in earnings).

[dmertz]

If what is now your traditional IRA contribution for 2016 is a nondeductible traditional IRA contribution, your 2016 tax return must include Form 8606 to report the nondeductible contribution.  After entering the Roth IRA contribution and indicating that you recharacterized it to a traditional IRA, TurboTax will automatically prepare Form 8606 Part I to report any nondeductible traditional IRA contribution.

If the contribution ended up as an entirely deductible traditional IRA contribution, the deduction will appear on Form 1040 line 32 or Form 1040A line 17, with no need for Form 8606.

[burnsm00]

I see your post is almost two years ago, but did you find a solution? In 2019, I contributed $7k to a Roth that in 2020 (before I filed my 2019 taxes), I recharacterized to a traditional IRA along with $730 of interest.  I know I must fill out a 2019 Form 8606 to report the nondeductible contribution. But, how do I handle the 2020 1099-R (distribution code = R)?   Turbo Tax tells me to amend my 2019 tax return.  When I do this, the impact is a 6% excise tax on the interest. Is this correct?  I cannot find any guidance on how to report the income.  Any help would be greatly appreciated.

[dmertz]

The message from 2020 TurboTax is just reminding you that the effect of the recharacterization, a $7,000 traditional IRA contribution, needs to be reflected on your 2019 tax return.  As you said, you'll do that by filing 2019 Form 8606 to report the nondeductible traditional IRA contribution for 2019.  If you also did a traditional IRA distribution or Roth conversion in 2019, the addition of the nondeductible traditional IRA contribution for 2019 might change the taxable amount of that distribution or conversion, requiring Form 1040-X to be filed as well.

The $730 of interest transferred to the traditional IRA simply becomes $730 of interest earned in the traditional IRA as if the original contribution had been made to the traditional IRA and the interest had accrued there.   The $730 doesn't appear anywhere in your amendment other than as part of your description of the recharacterization in an explanation statement.  Gains in your traditional IRA aren't taxable until distributed from the traditional IRA.

[burnsm00]

Thanks so much!  I have been struggling with this for days now!!!  Your explanation is the first one that makes sense to me.

Since I did not do any of these other things you mention, sounds like I only need to file a 2019 Form 8606. 

• Can I just send it in with my 2020 return or should I send it in solo? 
• Also, do I only report $7000 on Form 8606, line 1?  From your explanation, I think that the $730 of interest (that was ostensibly earned on it) should be/will be taxed when I start withdrawals from the Traditional IRA.  It should not be part of my basis, since it has not yet be taxed, unlike the $7000.    

[dmertz]

The 2019 Form 8606 must be mailed separately.  If you include Form 1040-X, these would be mailed to the address for your filing area indicated in the instructions for Form 1040-X.  If you mail the Form 8606 stand-alone, the instructions for Form 8606 say to mail it to the same address where you would have mailed your original tax return (had you paper-filed).  I think I would include Form 1040-X and use that as a place to provide explanation of the recharacterization, but either would probably suffice.

[burnsm00]

Thanks.  Great suggestion.  However, as to my other question

• Am I correct in saying the amount I report on line 1 of Form 8606 is $7000?  I know that in my explanation, I would give the total amount (contribution + interest).

[dmertz]

Somehow I managed to delete my earlier response to that question.  Yes, only the $7,000 goes on Form 8606 line 1.

[burnsm00]

Thank you again. 

[mbPB1921]

I got married in Nov 2020.  My wife and I put the max amount into a Roth IRA before we got married.  When doing takes in 2021, we realized that our income was too high to contribute to a Roth IRA.  We recharacterized the money into a traditional IRA and then back into the Roth IRA.  This was done on the same day.  We both received 3 1099-R statements and I entered those into Turbo tax.  1 was for the 2020 Traditional IRA recharacterization and the other for 2021 Traditional IRA recharacterization and the 3rd was for the Roth IRA showing combined contributions + gain.  I'm in the Traditional IRA & Roth part of Turbo tax under deductions & Credits.  Do I check the boxes for both Traditional & Roth?

[DanaB27]

If you only made a direct contribution to the Roth IRA and recharacterized it then you will only select Roth IRA.

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “Roth IRA”
4. Answer “No” to “Is This a Repayment of a Retirement Distribution
5. Enter the Roth contribution amount 
6. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
7. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
8. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

@mbPB1921

[mbPB1921]

Hello,

I did what you suggested and then had Turbo Tax track my contributions.  I entered in the explanations.  It seems that Turbo tax is asking me the same questions or I'm confused at the questions being asked.  Let me give more detail.  I got married in Nov 2020.  When my wife and I did takes in May 2020, this is when we realize since we both have work 401k, and our combined salaries were too high, we had already contributed to our Roths in 2020.  We both then recharacterized the contribution + gains from 2020 in May 2021.  It was at that time we made a contribution to our Roth's for 2021, and recharacterized that money at the same time before any gains or losses occurred.  I received 2 1099-R's for 2021 and I entered the numbers into Turbo tax.  One is for my Roth that shows the total contributed + gains.  The other one is for the Traditional but it appears to have the combined total of 2020 & 2021 contributions + gains from 2020.  Which do not make sense.  My wife's 1099-R show the same thing.  Is there anything from forms 5498 that I need to add?  Turbo Tax is asking me "Do you have any Excess Roth Contributions for 2021 or previous yeas?  I thought the information I was putting in already dealt with this question.  After I started entering in the IRA numbers (even the 1099-r), this is when my IRA tax due jump not quite double, something seems to be entered in wrong.  Any suggestions?

[DanaB27]

If you do not have an excess contribution from prior years (removed them in time or recharacterized it) then you will answer "No" to "Do you have any Excess Roth Contributions for 2021 or previous years?". It is just a standard question TurboTax has to ask everyone.

To verify, you contributed to the Roth for 2020 and 2021, recharacterized it to traditional IRA in 2021, and then converted it back to Roth in 2021, correct?

You entered the recharacterization on your 2020 tax return and made them nondeductible (or they were nondeductible because of your high income) and you each have Form 8606 with a basis on line 14. This basis will have to be entered during the interview on your 2021 tax return. You should have gotten Form 1099-R with code R for this. A Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore Form 1099-R with code R.

On your 2021 tax return, you entered the recharacterization and made them nondeductible (or they were nondeductible because of your high income). You should have gotten Form 1099-R with code N.

To enter the conversion Form 1099-R:

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R for the conversion
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "add 1099-R" and enter the Form 1099-R with code N
6. On the "Review your 1099-R info" screen click "continue"
7. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
8. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

@mbPB1921

[mbPB1921]

To answer your question.

"To verify, you contributed to the Roth for 2020 and 2021, recharacterized it to traditional IRA in 2021, and then converted it back to Roth in 2021, correct?"

YES!

I looked at my 1099-R and 1 has a code of 2 (in box 7) & and X in the IRA/SEP/SIMPLE.  The other 1099-R has an R for the code and the nothing else, no X in the other box.  MY wife has 3 1099-R and 1 had a code of R and an X, while the other 2 have codes of J8 and the 3rd as JP.  I looked back at our 2020 Return and line 14 of the 8606 forms for the basis is just showing our contribution amounts.  I do not see a Code N on any of the 1099-R.

Thanks.