Recharacterize Roth conversion done in 2022 in 2022 itself

[jawckey]

I majorly screwed up in Roth conversion I did for me and wife into IRA to Roth IRA in Jan 2022. Today in 12/26/2022 and I have to reverse this. This is my situation.

- Over the years before, and up and until 2022, me and my wife contributed both deductible and non-deductible contributions into our respective IRAs

- And this same IRA, in my case, also contains the 401K roll overs from earlier employments also

- So, both me and my wife's IRA has a mix of pre and post tax contributions.

- In Jan 2022, I rolled over only the the post tax IRA contributions from the respective IRA accounts into our respective ROTH IRA accounts, without knowing that the rolled amount will be treated split between post and pre-tax by IRS! I came to learn this is a mistake only on Merry X-mas 2022 :(

- By Jan 2022, I was 62 yrs and my wife was 53 yrs (not sure if age is relevant for all this)

- I vaguely know we can recharacterize this roth conversion before Oct 15th 2023 

I will call my IRA & Roth IRA custodian on 27th dec (26th Dec 2022 being holiday) to do recharacterize the amount since I want to cover the recharacterization before I file 2022 return. Pl. help with these questions. 

a) Do I have to recharacterize before 31st Dec 2022 itself to cover both roll over and recharacterizes into my 2022 return?

b) OR I can recharacterize it before April 2023 prior to filing the return?

c) I use turbo-tax premium for my taxes. I am not finding any menu that shows

       - neither how to report my Jan 2022 roth conversion

       - nor how to report recharacterizing the reversal  that I want to do in Dec 2022 for the above Roth  conversion

       - Pl. point me to where to look for this in Turbo-Tax premium. It only asks for if I made IRA contribution, which I did into both of our accounts for 7000 each. But the roth conversion that I already did is over 50K for each of us and thus the recharacterization that I want to now do will be in that range. So I couldn't figure the forms.

Pl. help

o include

[jawckey]

I saw a bummer! Think I royally screwed this up! Just now read up Pub 590A and it says ...

No recharacterizations of conversions made in 2018 or later. A conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made after December 31, 2017, cannot be re-characterized as having been made to a traditional IRA.

So I can't recharacterize,  right?

[Critter-3 · Accepted solution]

Yep…you are out of luck. 

[Opus 17]

You just have to deal with the fact that the rollover to the Roth included a split of pre- and post-tax contributions, do the math, and keep copies of the paperwork and tax returns.  Your IRAs will still contain a mix of pre and after-tax money unless you do a conversion of the entire balance and deal with the situation once and for all.  

[jawckey]

What a mess I created for myself, and staring at staggering tax bill! But thanks for confirming my doubts.

Pl. clarify the following too.

- Besides all this screw up I also did another, which I hope is not a screw up

- In 2021, because of being 62 years old, and since the investments choices in my employer 401K really sucked, I rolled over all ALL of that 401K into an IRA that I already had (the same one that had mix of pre and post tax contributions)

- Both the 401K and the IRA are with the same institution

- They did the roll over directly without money changing to my hand etc

- They did send me 1099-R with code G also

- When I used to file 2021 return around march 2022, I chose to download tax forms electronically via Turbo Tax premium from my IRA/401K provider

- But I do NOT know if it covered 1099-R G code one or not

- And I filed the return already now

Now getting a doubt that I have to amend 2021 return to report this roll over. So I tried to use Tubotax 2021 to do prepare amendment with data from 1099-R. After entering all of it, Turbo Tax is telling me that it is NOT seeing any difference between what I already filed and the amendment I am now trying to file!

From this I am guessing,

a) Since the roll over involved 0 tax and 0 taxable funds, I do not need to  do anything extra than what TruboTax did for me when I originally filed?

b) OR I chose to download electronically, Turbo Tax took care of all this and hence I do not need to amend?

c) OR if the roll over involved 0 tax and 0 taxable funds, such roll over doesn't need to be reported at all?

d) OR I have to still  file amendment no matter what?

Pl. clarify the above.

And I did the same in 2020 (already filed) and 2022 (yet to file) also. So want to know if I have to do anything even for these two from the answers above.

[jawckey]

Also pl. clarify how do I use TurboTax 2022 premium when I file 2022 return 

- to report the screwed up IRA (mix of pre and post tax money) that I partially converted to ROTH in 2022

- I am assuming that I will get a 1099R with some code letter and just enter those details

- And pay the taxes on the tax able proportion of the converted money? Hopefully 1099-R will give this figure

Is this correct?

If correct, what code letter would be for 1099R for this conversion? 

[fanfare]

you have to tell turbotax in the interview that you have a prior years basis and/or non-deductible contribution.

after that, Form 8606 is generated and the calculation is done on that form.

1099-R does not have the taxable amount. Your custodian does not know how many other IRAs you might have.

@jawckey 

[jawckey]

Pl. clarify this question.

I did roll over my previous employers 401K with deferred tax contributions into a 1099 R with a code G and it said 0 taxable income. I did this roll over sometime in the past. But I did NOT use that 1099R in preparing my return in that year. So pl. tell me

a) Since it has not tax implications, no need to report it in return

b) OR no matter what we must report it and so, if I didn't report it, I have to now file an amendment for that year?

regards

[fanfare]

you are expected to report all 1099-R even if not taxable.

BUT

since it is not taxable, there's no point to do any amendment at this time.

no dollar amounts would change.

@jawckey 

[Opus 17]

@jawckey 

Do nothing about last years tax return unless the IRS contacts you.  Because the rollover would not result in additional tax or refund, TurboTax won’t prepare it anyway.