Form 8606 with Roth Rechar to TIRA and backdoor Roth

[macuser_22]

Ah-yes.  I overlooked that.    Since a recharacterization treats the contribution  as if it has been made to the Traditional IRA in the first place, and if it was a 2019 contribution then indeed, it must be added to the tax worksheet line 4, just as if it had been contributed in 2019 directly to the Traditional IRA.

I deleted my comment above.

[GatorCO]

So does the $4800 2019 contribution (made in 2020) not count toward the value of the TIRA on dec 31, 2019?

[dmertz]

The bottom line is that the results you indicated seeing on your Form 8606 and the worksheet are as should be expected for the transactions that you performed.

Normally the basis from the $4,800 nondeductible contribution made in 2020 for 2019 would not apply to the 2019 conversion, but the use of the worksheet changes that.  The worksheet does apply the $4,800 of basis to the 2019 conversion.  TurboTax is rather liberal in its use of the worksheet and probably should not be using it in cases where the deductibility of the traditional IRA contribution is known without having to consider AGI, such as when you explicitly choose to make the contribution nondeductible or your modified AGI would be above the threshold even if reduced by the entire amount of the traditional IRA contribution, but TurboTax uses it anyway.

[GatorCO]

So have I entered the Taxable IRA Distribution Worksheet correctly?

1. 6000  --- 1200 (2019 roth contrib made in 2019 rechar to TIRA in 2020)  + 4800 (2019 contribution made in 2020)

2.  5500

3.  11500

4.  1200   --- or should this be 6000 or something else?

5.  0

6.  5749

7-13. math based on previous lines.

[dmertz]

Yes, that's the result I expect and that I get when I enter the transactions that you've described.  It seems strange that the basis added by the contribution for 2019 made in 2020 gets applied in determining the nontaxable portion even though the same contribution does not get added to the year-end balance, but that's the way Worksheet 1-1 in IRS Pub 590-B works.

[macuser_22]

 I have always wondered why it is calculated differently when there is a contribution and distribution in the same year.  That almost seems to be an IRS logic error that has been there for years.

[GatorCO]

Thank you both for working through this with me. 

I still find it strange that there is no taxable amount even though there were gains on the initial 5500 (5749).  But I guess it all changes when you have a contribution and distribution in the same year.