Recharacterize from Roth IRA to Traditional. Then Backdoor back to Roth IRA.

[Anonymous50]

Thanks for the quick response!

But why is it that I'm getting a message "we transferred a total basis in all our traditional IRAs of zero for all years through 2022. We calculated a different total basis of $202 from your entries on the previous screen." AND I need to "attach an explanation".

Does it matter if I have converted all my balance from Traditional IRA to Roth IRA for all these years? (though I have done recharacterization)

@DianeW777 

[DianeW777]

I see a note from @DanaB27 where your balance in 2022, due to the Roth conversion(s), should have been zero, however, since you had a remaining basis of $202 when you completed your transfers, you should enter that in your 2023 tax return from your 2022 8606.

Your value in the traditional IRA was $0 at the end of 2022 but you had a loss by the time you converted the funds in 2022 therefore you still had a basis left of $202. It must be carried over to 2023.  It's not clear why it didn't transfer, but if necessary you must enter it.

@Anonymous50 

[Edited: 04/01/2024 | 5:34 AM PST]

[Anonymous50]

Thanks for the updated response. @DianeW777 

1) To confirm, the 2022 tax return was accurate? The previous response seem to suggest I made an error in the 2022 tax return.

2) So, if the re-characterization and conversation for backdoor is a clean conversation (without gain/loss), the total basis on line 14 would have been zero. But because I had a loss, my 2022 line 14 was 202. 

3) Could this error that Turbotax did not transfer the right amount from my 2022 line 14 to 2023 line 2 be fixed by Turboxtax IT support? Because now, if I enter 202 as total basis, it forces me to write an explanation that seems to suggest I made an error in my 2022 tax return. "Indicate the reason why the IRA basis changed from 2022 to 2023".

4) Moving forward, if I were to perform a clean conversation from Traditional to Roth IRA every year, the balance 202 will be always remained i.e. line 14 will be 202 for future years.

[DianeW777]

Yes, the 2022 return was accurate and you are correct that it was due to the loss. Enter the amount from 2022, Form 8606, Line 14.

Simply write the true reason which is that the account had a loss in value which is why you still have a cost basis in your traditional IRA. 

As of now the loss remains as part of your cost basis, it could happen again in the future. If you convert nondeductible contributions right away, (without any gains), this basis will continue to carryover.

• Instructions - Form 8606 - You can review who must file. In any year where it is not required be sure to keep the most recent copy with your tax return to remind you of the basis you do have.

@Anonymous50 

[Edited: 04/02/2024 | 5:54 AM PST]