How do I enter recharacterization of excess Roth contribution and subsequent backdoor Roth contribution?

[dmertz]

Your last post confuses the traditional distributions with the Roth IRA distributions.  The Forms 1099-R for the recharacterizations (codes N and R) are from the Roth IRA(s).  The Forms 1099-R for the Roth conversions are from the traditional IRAs (code 2).  The distributions from the traditional IRAs are coded with "2" to indicate that the traditional IRA custodians knew that the distributions were not subject to any early-distribution penalty because they knew the they were deposited into Roth IRAs as Roth conversions.

If you are seeing a taxable amount of $268 (or $286, you've variously said both for the amount of earnings) on 2019 Form 1040 line 4b, everything is likely correct.  Form 8606 should show:

• Line 1 = $6,000
• Line 2 = $1,000
• Line 3 = $7,000
• Line 13 = $7,000
• Line 14 = $0
• Line 15a = $0
• Line 15b = $0
• Line 15c = $0
• Line 16 = $7268
• Line 17 = $7000
• Line 18 = $268

Form 1040 line 4a should show $10,536 and line 4b should show $268.

($10,536 = $3,268 + $6,268 + $1,000)

[sfoksn]

@dmertz Thank you.  I can confirm that my Line 4b does show the taxable amount to be $286 (sorry I know I may caused some confusion here) as I can preview my 1040 on TurboTax before final filing.

But I am unable to preview my Form 8606... Is there a way to do this without finalizing the filing? 

Thanks for your help and hopefully you are staying safe during this crazy outbreak!

[sfoksn]

@dmertz Sorry for double post, but to clarify - should I input 1099-R for Traditional IRA and Roth IRA both? 

If I enter both, it makes it look like I've received double the amount of distribution in terms of IRA distribution income, as it counts the $1000 twice (once from Roth IRA 1099 and once form Tradititional IRA 1099), and $6286 twice also for the same reason.

Thanks again

[dmertz]

You can download and review all of the forms, schedules and worksheets in your tax return before filing once you pay for TurboTax.

If the correct amount of earnings is $286, the amount on Form 1040 line 4a should be $10,572.  As long as you indicated to 2019 TurboTax that the code R Form 1099-R for the $1,000 recharacterization was a 2019 Form 1099-R (or didn't enter it at all into 2019 TurboTax), TurboTax will not include this $1,000 twice on line 4a.  Line 4a will be the sum of the gross amounts of two code 2 Forms 1099-R and the code N Form 1099-R:  $1,000(code 2) + $6,286(code 2) + $3,286(code N) = $10,572

If you see $11,572 on line 4a, you've done something wrong.

[macuser_22]

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@sfoksn wrote:

But I am unable to preview my Form 8606... Is there a way to do this without finalizing the filing? 

In the online versions, you can only print all forms and worksheets to view the 8606 after you have paid the TurboTax fees.

[sfoksn]

@dmertz Thank you.  I don't get any errors when entering the Traditional IRA 1099-R but when I am entering my Roth IRA 1099-R for the $1000 recharacterization/conversion, after I enter all the data as written, it asks:

"Which year on Form 1099-R?" I answered 2019, since that's the year I received the 1099-R

Then it says "It looks like you may need to amend your 2018 return, here's why: your 1099-R reports earnings on a contribution you made in 2018. This information needs to go on your 2018 return"

I am confused to why... 

These are the values listed on my 1099-Rs:

Roth IRA 1099-R:
Box 1: 1000

Box 2a: 0

Box 2b: nothing checked

Box 7: R

IRA/SEP/SIMPLE: not checked

Traditional IRA 1099-R:

Box 1: 1000

Box2a: 1000

Box 2b: Taxable amount not determined checked

Box 7: 2

IRA/SEP/SIMPLE: checked

Do these 1099-R values look right? Why does it say I have earnings on my contributions?

Am I supposed to report both Roth IRA and Traditional IRA 1099-Rs? 

Thank you so much for your help, @dmertz, @macuser_22 , I hope we can come to resolving this problem...

[sfoksn]

@dmertz  Additional information:

I've added all 4 1099-R's into Income & Expanses tab (2 Roth IRA 1099's and 2 Traditional IRA 1099's), however, the Total Withdrawals are added up to $11572 under the 1099-R entry tab (under Income & Expenses, after clicking Edit/Add button next to IRA, 401k, Pension Plan Withdrawals line) . It's normal for all the 1099-R values to add up, right? 

On my 1040, I have 10572 on Line 4a and 286 on Line 4b, as you mentioned.

[dmertz]

Regarding "It looks like you may need to amend your 2018 return, here's why: your 1099-R reports earnings on a contribution you made in 2018. This information needs to go on your 2018 return," you don't have to amend 2018 if your 2018 tax return reflects the recharacterization.  That's what we discussed in your other question.  Also, TurboTax uses the same message for both code R and code P Forms 1099-R, but earnings are only relevant to code P, not to code R.

Ignore TurboTax's summary totals.  Total Withdrawals is probably including the $1,000 from the code R Form 1099-R which is irrelevant to your 2019 tax return.  What matters is what is on Forms 1040 and 8606.  If you want to see if the extra $1,000 in Total Withdrawals is coming from the code R Form 1099-R, delete that form from 2019 TurboTax.

[sfoksn]

@dmertz  Thank you for your continued help.

Yes, recharacterization is reflected on my 2018 tax return with Form 8606 line 1, 3, 14 saying $1000 and there's also a recharacterization explanation statement regarding 1040 Line 4a.   Is there any other area I should check?

Yes, it appears that Total Withdrawal is including all the values including the code R form as well.  I will keep it on the records just for completeness's sake, as my 2019 1040 line 4a reads 10572 and line 4b reads 286 as you said before. 

It's a shame I am unable to view Form 8606 until final submission but is there anything else you would recommend me checking before submitting this?

Once again, thank you so much for your help!

[dmertz]

As we said, you can view the Form 8606 after paying but before filing.

[sfoksn]

@dmertz  Thank you so much for your help.  I will be sure to review Form 8606 after I make the payment. 

For my wife, for tax year 2019 she contributed $6000 into Traditional IRA on 1/2020 and that was converted immediately without gain in 1/2020 as well.

To enter that, under Deductions and Credits, she would only check Traditional IRA only, and input all 6000 contributed between 1/2020-4/2020, then claim 6000 nondeductible contribution, right?  And she will file her 1099-R with her next year's return?

Should be the last question! Thank you so much for your help and hope you stay safe during this virus outbreak!

[dmertz]

With respect to your wife's traditional IRA contribution and Roth conversion, yes, that's correct.