Recharacterization of Roth IRA contribution to an IRA in 2020

[xinezen]

On my 2020 taxes, I recharacterized a Roth IRA contribution to an IRA, since I was no longer eligible to contribute to the Roth IRA. I followed the Turbo Tax instructions to avoid paying a 6% penalty. I made the contribution in 2020 and withdrew it in 2021 prior to the due date of the 2020 tax return. I did not have a 1099-R form at the time and there were no earnings on the contribution. On the tax return, I entered the 1099-R with the codes of P and J in box 7 and entered the issue year of the 1099-R as 2021.

I now have the 1099-R Form from the recharacterization and it has the code of "R". Do I need to do anything with this on my 2021 tax return? Or do I need to amend my 2020 tax return?

[MaryK4]

Just to clarify, did you take a distribution (actually receive the money back) in 2021 or did you re-characterize?  @xinezen

[xinezen]

I recharacterized from the roth IRA to a standard IRA.  I did not take a distribution.

[DanaB27]

To recap, you had entered a Form 1099-R with codes P and J for the return of excess contribution (but had no earnings) but instead of withdrawing the excess contribution, you recharacterized your Roth contribution to a traditional IRA.

You will have to amend your 2020 tax return to remove Form 1099-R with codes P and J and report the recharacterization in the IRA contribution section.

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)

Form 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and this belongs on the 2020 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the 1099-R with code R.

@xinezen

[xinezen]

To clarify, I put money into the Roth IRA and recharacterized it to the IRA on the 2020 Tax forms. Do I still need to amend the 2020 taxes? When I try to amend, Turbo Tax will not bring up my 2020 Tax Forms even though they are there. What can I do? Is there a manual way for me to amend the 2020 taxes?

Thank you 

[DanaB27]

If you entered the recharacterization on your 2020 return then you do not need to amend your return. Technically if you created a Form 1099-R with codes P and J then this form doesn't belong on your 2020 return but since you didn't enter any earnings this form wasn't taxable on your return and therefore your taxable income wasn't affected. Deleting it won't change your refund.

If you need additional information about the forms not showing up then please see What is the TurboTax phone number?

@xinezen