IRA Recharacterization + Tax questions

Forum|Forum|4 years ago
January 13, 2022
1 reply
0 views

Hello, I have a few questions regarding my recent IRA recharacterization as I will be filing my taxes soon for tax year of 2021.

1. First time contribution to IRA-
I contributed $6000 to Roth IRA back in June 2021 but realized I had to contribute to Traditional instead due to income limit, also my contributions would be non deductible.

2. I recharacterized through Vanguard recently (January of 2022) to transfer all amount to Traditional which now has some gains other than original $6000 contribution amount.

I was wondering if these are the right steps to take when filing taxes for tax year 2021:
1. Do I file form 8606 and report the amount of original contribution (as if it was contributed to Traditional originally) along with recharacterization statement explaining my recharacterization?

2. Since recharacterization was done in 2022, I will receive my 1099-R in 2023 for tax year of 2022. if above step is correct and done correctly, does this mean there is no need for me to amend my 2021?

3. For the gains that's also transferred to Traditional IRA account, any actions to take now or can wait unless I make backdoor Roth IRA conversion later this year.

Thank you so much.

MaryK4

Level 15

1. Yes, you do want to file the 8606 and include the recharacterization statement. In Turbo Tax, you can do this in the Deductions & Credits section- indicate that you contributed to a Roth only (TurboTax will ask the questions to get the reporting correct).

2. Next year, you will get the 1099-R for tax year 2022 which will have the interest income as taxable- it will be reported on the 2022 tax return. It will also show the recharacterization, but since you are entering it this year you will not have to amend.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"