☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 1
posted Mar 19, 2022 9:39:59 AM

Recharacterization of Traditional IRA to a Roth ( part of the contributions)

Hello,
I contributed 6000 to my Traditional IRA in Jan 2021. I have changed my mind and Recharacterized from Traditional IRA to a Roth around Nov 2021. This traditional IRA has contributions from the previous 10 years so this will not be a full conversion.

 

Vanguard sent me a 1099R with 7200 as the gross distribution (1). The Taxable amount (2) is 0 and the Taxable amount not determined (3) is empty. They also have a disclaimer that they don't have all the information to compute the tax and I may need to do that myself.

 

I would assume I need to pay tax for my earnings of 1220 (7200-6000)Distributions - contributions.

 

After entering the 1099R is TurboTax I don't see any additional tax deducted or anything to do with the calculation. Am I missing something?

Do I need to do anything to trigger this tax deduction in TurboTax?

 

Can someone please point me in the right direction on this?

 

Thanks in Advance

0 2 358
1 Best answer
Expert Alumni
Mar 19, 2022 9:57:16 AM

To verify, did you recharacterize your traditional IRA contribution as Roth IRA (nontaxable, code N in box 7 of your Form1099-R) or did you convert funds from the traditional IRA to Roth IRA (generally taxable)?

 

If you recharacterized your contribution your contribution will be deemed as never have been made to the traditional IRA but deemed to have been made to the Roth IRA instead. You will not have to pay any taxes on the earnings.

 

If you indeed recharacterized your contribution then you will have to enter this into TurboTax:

  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 “traditional IRA”
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the traditional IRA 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.

2 Replies
Expert Alumni
Mar 19, 2022 9:57:16 AM

To verify, did you recharacterize your traditional IRA contribution as Roth IRA (nontaxable, code N in box 7 of your Form1099-R) or did you convert funds from the traditional IRA to Roth IRA (generally taxable)?

 

If you recharacterized your contribution your contribution will be deemed as never have been made to the traditional IRA but deemed to have been made to the Roth IRA instead. You will not have to pay any taxes on the earnings.

 

If you indeed recharacterized your contribution then you will have to enter this into TurboTax:

  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 “traditional IRA”
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the traditional IRA 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.

Level 1
Mar 19, 2022 10:59:46 AM

Yes, Line 7 Distribution code is (N) and IRA/SEP/SIMPLE is Marked (X ). Thanks for your response and look like i don't need to pay tax. Appreciate your help.