Recharacterization of Roth IRA Contributions to Traditional IRA Contributions in 2019 (for 2018)

[dtaxstraszy]

Throughout 2018 and early 2019, I was contributing to my Roth IRA. However, in March 2019, when I was doing my 2018 taxes, I realized I wasn't eligible to contribute to a Roth IRA because of the income limits. I recharacterized my contributions ($5,114) on April 2, 2019, just before filing my tax returns. With Turbo Tax's guidance, I submitted an explanation statement with my 2018 return listing the amount of the recharacterization, the date of the recharacterization, the amount transferred ($5,223), and the reason for the recharacterization. I treated the contributions as having been traditional IRA contributions, though I was not eligible - for reasons that escape me -  to deduct them. Those contributions were listed as nondeductible IRA contributions on form 8606. Box 4a on form 1040 was left blank, though it directs you to the attached statement.

In January 2020, I received a 1099-R for the distribution from the Roth that listed $5,223 in box 1 (Gross distribution), 0.00 in box 2 (Taxable amount), and "R" in box 7 (Distribution code). When doing my 2019 taxes, Turbo Tax said I need to amend my 2018 return. I want to know if this is correct, and if so, what do I need to change? I suspect it may want me to report the earnings on the recharacterized amount, but where would I report that and how? Separately, how do I amend a 2018 return?

[KarenM90]

No, TurboTax's message is a reminder.  

If your 2018 tax return already shows the recharacterization and reports the entire $5223 as a non deductible traditional IRA contribution, there is nothing that needs to be changed on your 2018 tax return.

If that is not the case (that the entire amount withdrawn was considered a non deductible IRA contribution and reported as such on your 2018 tax return) and you do need to amend, you would follow these instructions:

1.  Sign in to your Turbo Tax Account

2.  Scroll down to  Your tax returns and documents and select Amend (change) 2019 return, then Amend using Turbo Tax Online.

3.  Select the reason you are amending and Continue

4.  Answer the questions about your Federal return, (there may be no changes) then begin amending your State return when it says "Lets get started on your state taxes...."

[dtaxstraszy]

Thank you for your response! My 2018 return shows $5,500 as my nondeductible contributions to traditional IRA's (box 1 of form 8606) because I made a contribution in addition to the amount recharacterized. I am assuming this means I do not need to amend. Just be clear though, $5,114 was the amount recharacterized and $5,223 was the amount transferred (amount recharacterized plus the interest earned). Does that make a difference?

[KarenM90]

No, as long at the transaction was reported correctly (along with the additional non deductible contribution of the difference between $5223 and $5500) on your 2018 tax return, you do not need to amend!

You are good to go!