Recharacterization of IRA contribution in the following year

[brian991]

I have a IRA contribution in 2022 that I recharacterized part of in 2023.  I will not get a 2023 1099-R until January 2024.  Turbotax has examples where it says to predict the numbers and enter a 2023 1099-R even though one has not been received.

There are two problems with this.  First, I don't see a way to put in a 2023 1099-R, only 2022.  Second, the IRS form 8606 instructions has an example where it says the explanation statement regarding the conversion you attach is all that is needed:

"You don’t report the $3,300 distribution from your traditional IRA on your 2022 Form 1040 because the distribution occurred in 2023. You don’t report the distribution on your 2023 Form 1040 because the recharacterization related to 2022 and was explained in an attachment to your 2022 return."

I believe that Turbotax is wrong here based on the Form 8606 instructions.  Can anyone confirm this?

[DanaB27]

No, you have to report the recharacterization on your 2022 return as stated in the instructions "recharacterization related to 2022 and was explained in an attachment to your 2022 return." Please see the steps below.

You will enter the recharacterization when you enter the contribution to the Roth IRA: 

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions” 
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. 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.
9. 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)

You will get Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2022 and this belongs on the 2022 return. But 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 when you get it in 2024. Box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

If you converted the amount to Roth IRA in 2023 (backdoor Roth) then you will enter this next year on your 2023 tax return (you will get a Form 1099-R for this conversion). 

[brian991]

Your example was for a Roth to Traditional but mine was actually a Traditional to Roth.  But I think the process is similar and consistent with my understanding and the form 8606 instructions.  The attached explanation statement is how the recharacterization is reported and the 1099-R can be ignored.

I believe Turbotax's examples are incorrect.  When you get to "Tell us how much you transferred" and click on "Examples", there are a number of examples that contradict this.  For instance one example talks about entering the numbers for a 2023 1099-R that you haven't even received on your 2022 taxes.  And then reporting it as a 2023 form even though there isn't a way to do that. 

"Although Robert did not receive a Form 1099-R before he files his 2022 tax return, he must report the recharacterization transaction on his 2022 return. Robert enters a Form 1099-R even though he did not actually receive one. He only needs to enter the payer information, the amount transferred ($2,750) in box 1, and code "R" in box 7. He must then indicate that the 1099-R is a 2023 form."