Seem to be double taxed

Forum|Forum|3 years ago
April 8, 2023
2 replies
0 views

Hi I am currently trying to file my tax report using turbotax premier.
I had to do recharacterize/conversion (roth to traditional and back to roth ira due to unexpected financial change).
I received 4 forms of 1099R(marked for 2022) (2 for me and 2 for my wife - we both did the same thing R to T and T to R ira). Although they are marked 2022, but for 2021.
since we knew our income(agi) will not be greater than 200k this year thus we contributed to our roth IRA account.

I did import forms from the fidelity (my retirement bank) then the 4 forms were automatically imported.
when I when through the turbo tax, it shows me that I need to pay the tax due to taxable income, which is the sum of the recharacterized IRAs (me and my wife - joint filing).

why is the total of the recharacterized/converted contributions

are taxable? Since I payed the tax for the roth ira (before recharacterization), it is double taxed.

fanfare

Level 15

it would be easier if you do not import those 1099-Rs and just report the net result, because the unwanted effect have to be unwound with the proper Q&A which can be troublesome.

@tobyicnoise

fanfare

Level 15

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings are ignored.
report this on your tax return for the year during which the contribution was made.

return of excess contribution:

before tax due date including extensions: positive earnings allocable to the excess are taxable on the Line 4b for the year of the contribution. negative earnings are ignored; therefore, do report the entire requested amount as returned .

positive earnings removed are penalized 10% if you are under age 59 1/2.

after tax due date including extensions: you distribute the excess amount being carried forward on 5329,

(or offset it with currently allowed contribution) .

Earnings stay in the Roth account.

if you are doing a backdoor Roth, the contribution into the Traditional IRA has to be designated non-deductible

@tobyicnoise

fanfare

Level 15

since you are not doing a return of excess contribution,

you can ignore that part.

@tobyicnoise

tobyicnoiseAuthor

Level 2

if you recharacterized 2021 you have to put the contribution and its non-deductible status on 2021 Form 8606.

if you did not file that way you have to amend 2021 tax return.

if you converted to a Roth in 2022, that is not a contribution.

you should see a check in the "taxable amount not computed" check box on your code 2 1099-R.

Reason: your tax on the conversion is computed on 2022 Form 8606 in conjunction with 2021 Form 8606.

@tobyicnoise

Hi Fanfare

thanks for all answers.

I see nonzero value in 1099-R (traditional, distribution code 2 - conversion). My case it says $5,298.47.

I did recharacterize it in 2022 before tax due date for 2021 contribution.

I try to change form 8606 to make sense (e.g., taxable amount to zero because I first contributed to roth ira in 2021 and then recharaterized it later. Thus I paid the pay when I contributed to Roth ira. ) but it won’t allow me to do it.
Spent all day long today to figure this out.

Thanks.