Properly reporting a Roth IRA recharacterization to a traditional IRA

[Pwu909]

I made a contribution of $4718 to my Roth IRA but a month later I recharacterized that to a Traditional IRA (due to income restrictions); it had grew in value but I forget by how much (and my brokerage account activity log does not specify).  I then made an additional contribution of $1282 to my Traditional IRA (to make the max IRA contribution of $6000 for the year). 

After these contributions, I did a backdoor Roth by converting all my Traditional IRA (valued at $7034.21 at that point) to a Roth IRA.  My question is how do I enter these numbers correctly into TurboTax?

Here are my tax forms numbers:

Traditional IRA Form 5498:

1.) IRA Contributions:  $1,282.00

4.) Recharacterized Contributions: $5,681.40

5.) Fair market value of account: $0.00

7.) IRA Type: IRA

Roth IRA Form 5498:

3.) Roth IRA conversion amount: $7,034.21

7.) IRA type:  ROTH IRA

10.) Roth IRA contributions:  $4,718.00

Traditional IRA 1099:

1.) Gross Distribution: $7,034.21

2a.) Taxable amount: $7,034.21

7.) Distribution Code: 2

Roth IRA 1099:

1.) Gross Distribution: $5,681.40

2a.) Taxable amount: $0.00

7.) Distribution Code: N

Here's what I did.  I first entered my 1099-Rs: 

Personal Income -->

Choose what I want to work on -->

Retirement Plans and Social Security -->

IRA, 401(k), Pension Plans (1099-R) -->

Did you receive any 1099-R forms? Yes -->

Tell us which 1099-R you have: Form 1099-R-->

For my Traditional IRA 1099-R, I entered these numbers:

1.)  Gross Distribution: $7034.21

2a.) Taxable Amount: $7034.21

2b.) Checked box "Taxable amount not determined"

3.) Capital Gain: $0

4.) Federal Income Tax Withheld: $0

5.) Employee Contributions etc.: $0

6.) Net Unrealized Appreciation: $0

7.) Select code that matches Box 7 on 1099-R: "2-Early Distribution (except Roth IRA)"

8-12.) Blank

- GOOD NEWS: YOU DON'T OWE EXTRA TAX ON THIS MONEY

- WHAT DID YOU DO WITH THE MONEY?

    - Checked "moved the money to another retirement account"

    - Checked "did a combination of rolling over, converting, or cashing out the money"

    - Amount converted to a Roth IRA account: $7034.21

For my Roth IRA 1099-R I entered these numbers:

1.)  Gross Distribution: $5681.40

2a.) Taxable Amount: $0

2b.) No boxes checked

3.) Capital Gain: $0

4.) Federal Income Tax Withheld: $0

5.) Employee Contributions etc.: $0

6.) Net Unrealized Appreciation: $0

7.) Select code that matches Box 7 on 1099-R: "N-Recharacterized IRA contribution made"; IRA/SEP/SIMPLE box is NOT checked

8-12.) Blank

- WAS PATRICK EMPLOYED AS A PUBLIC SAFETY OFFICER: No

- DID YOU TAKE ANY DISASTER DISTRIBUTIONS? No

- ANY NONDEDUCTIBLE CONTRIBUTIONS TO PATRICK'S IRA? No

- TELL US THE VALUE OF YOUR TRADITIONAL IRA: On Dec 31, 2020: $0

- EXPLAIN YOUR RECHARACTERIZATION: 

Date of the Original Contribution: 04/06/2020

Date of the Recharacterization: 05/01/2020

The Amount Recharacterized: $4718.

The Amount Transferred (Recharacterization plus earnings or losses): $5681.40

Then I entered my Form 5498s:

Deductions & Credits -->

Choose what I want to work on -->

Retirements and Investments --> Traditional and Roth IRA Contributions --> Check both Traditional IRA and Roth IRA boxes:

- IS THIS A REPAYMENT OF A RETIREMENT DISTRIBUTION?  No

- TELL US HOW MUCH YOU CONTRIBUTED:

     - Total 2020 traditional IRA contributions: $1282

     - How much contributed between Jan 1, 2021 to April 15, 2021: $0

- TELL US HOW MUCH YOU TRANSFERRED:

     - Amount switched from Traditional IRA to Roth IRA contribution: $0

- RETIREMENT PLAN COVERAGE: No

- ANY EXCESS IRA CONTRIBUTIONS BEFORE 2020? No

- ANY NONDEDUCTIBLE CONTRIBUTIONS TO PATRICK'S IRA? No

- TELL US THE VALUE OF ALL YOUR TRADITIONAL IRA ACCOUNTS on Dec 31 2020: $0

- ENTER YOUR ROTH IRA CONTRIBUTIONS: $4,718

- TELL US HOW MUCH YOU TRANSFERRED: $4,718

- ROTH IRA EXPLANATION STATMENT:

Date of the Original Contribution: 04/06/2020

Date of the Recharacterization: 05/01/2020

The Amount Recharacterized: $4718.

The Amount Transferred (Recharacterization plus earnings or losses): $5681.40

Reason for the Recharacterization: Made erroneous contribution to Roth IRA, meant to contribute to Traditional IRA.

- DID YOU OPEN A ROTH IRA BEFORE 2020?  No

Sorry for the longwinded explanation, just trying to make it easier for someone to correct any mistakes I made without going through a whole step-by-step tutorial.  Any help is obviously appreciated!

[DanaB27 · Accepted solution]

When doing a backdoor Roth conversion it is important to make the contributions to the traditional IRA nondeductible.

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “IRA contributions”
3. Click on “Jump to IRA contributions” and you should see the “Traditional IRA and Roth IRA” screen.
4. Continue reviewing questions until the “Choose Not to Deduct IRA Contributions” screen and choose “Yes, make part of my IRA contribution nondeductible” and enter $6,000.

To verify that the entry is correct (after entering all 1099-R) please look at form 1040 line 4b (taxable amount), only $1,034 (the value increase) should show there. 

To preview Form 1040:

1. Click on "Tax Tools" in the left menu
2. Click "Tools"
3. Click "View Tax Summary" in the Tool Center window
4. Click on "Preview my 1040" on the left

For reference please see the complete instructions how to enter a backdoor Roth if needed:

To enter the nondeductible contribution to the traditional IRA:

1. Login to your TurboTax Account 
2. Click "Federal" from the left side of your screen
3. Click “Deductions &Credits” on the top
4. Scroll down to “Retirement and Investments” and click “Show more”
5. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
6. Select “traditional IRA”
7. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
8. Enter the amount you contributed
9. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
10. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes”
11. If you had a basis in the Traditional IRA before then enter the amount.
12. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount.

To enter the 1099-R distribution/conversion: 

1. Click "Federal" from the left side of your screen
2. Scroll down to “Retirement Plans and Social Security” and click “Show more”
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan Withdrawals (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
9. Then choose “I converted all of this money to a Roth IRA account.”
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
12. Answer the questions about the basis

[Pwu909]

Thanks for the reply DanaB27! 

I appreciate your help with the backdoor Roth instructions, but my problem is a little more complex.  I directly contributed to a Roth and later "recharacterized" that contribution to a Traditional, THEN backdoored that Traditional IRA to a Roth.  Because the original Roth contribution I made grew in value by about $1k by the time I recharacterized it, I wanted to make sure I was entering the correct numbers for each contribution in the correct locations on TurboTax since it's not as straightforward as a standard backdoor. 

Any further help you or anyone can offer is greatly appreciated!

[DanaB27 · Accepted solution]

Yes, according to your description you entered the recharacterization correctly. Therefore, I only mentioned making contribution nondeductible as only correction.

[Pwu909]

Ok got it, thanks so much DanaB27.  Really appreciate the help and time!

[dmertz]

The details that you provided indicate that your recharacterization of $4,718 was accompanied by gains of  $963.40 for a total of $5,681.40 moved from the Roth IRA to the traditional IRA.  These details need to be included in your explanation statement regarding the recharacterization.

[Pwu909]

OK I will do that too, thanks so much for the help!