Recharacterized 2023 and 2024 Roth contributions to traditional IRA. 2023 contributions recharacterized before 10/15/2024. How to report 2023 recharacterization?

[jp1624]

Our financial advisor notified us in mid 2024 that we were over the income limit for Roth IRA contributions for 2022, 2023, and 2024 tax years. 2022 contributions were completely withdrawn. 2023 and 2024 contributions were both recharacterized to traditional IRA. Turbo Tax has input fields for 2024 contribution recharacterization, but not for the 2023 contribution. How do I report this? Of note, the recharacterization of 2023 contributions was done before the extended tax filing deadline in 2024 (October 15, 2024). Is there a way to report recharacterizations from prior tax years? Or should total recharacterization amounts from 2023 and 2024 be combined and reported as a single recharacterization for 2024?

[DanaB27 · Accepted solution]

The recharacterization for the 2023 contribution has to be reported on your 2023 return. Please see How do I amend my federal tax return for a prior year?

You will enter the recharacterization when you enter the contribution to the Roth IRA 

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 “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. 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.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a warning and then a screen saying $0 is deductible)

Note, you can ignore the 2024 Form 1099-R with code R since it won't change anything on your return. You can only report it with the steps above. 

You will repeat the steps above for the recharacterization of the contribution for 2024 on your 2024 return. Note the 2024 Form 1099-R with code N has to be entered on your 2024 return.

[jp1624]

Thank you so much for this, this is a huge help!

[HawkinsB1]

Hello, I hope all is well. I'm looking at a recharacterization and I noticed the amount on the Roth IRA Contribution Worksheet is different compared to the amount on the 1099 R for the year the funds moved. Would this require an amendment of the 2023? Does the increase in need to be updated for the 2023 tax Return. 

As an example, for 2023 $7325 was contributed and 175 was recharacterized. But the 1099 R with Distribution Code R has a 188.13. The 7325 is listed on the worksheet. 

Thanks a million  @DanaB27 

[DanaB27]

To clarify, you show $7,325 on line 22 on the IRA contribution worksheet (Contributions recharacterized to Traditional IRA) instead of only $175? If yes, then you will nee to amend to correct the recharacterization amount. Please see How do I amend my federal tax return for a prior year?

@HawkinsB1 

[Hawkinsb]

Hello Dana,

Thanks for looking into this. The IRA worksheet has $7325 on Line 19. Money was moved from Traditional to a Roth IRA.  Line 22 has nothing there. 

I'm concerned the recharacterized amount on Line 20- Does not match the 24 1099 R. The 1099 R has different amounts from what's listed on the worksheet.  Does it need to be the exact amount of recharacterization from the form are is there some wiggle room for increases? 

Thanks @DanaB27 

Line 19: $7325 

Line 20: $175

Line 21: Blank 

Line 22: Blank 

Line 23: Blank 

Line 24: $7500

Line 25: Blank 

Line 26: Blank 

Line 27: $7500

Line 28: Blank 

[DanaB27]

This looks correct if you recharacterized $175 from Traditional IRA to Roth IRA. The difference between the amount listed on the worksheet and Form 1099-R is that you had gains moved to the Roth IRA when made the recharacterization. These gains have to be moved with the contribution since earnings are deemed to have been earned in the Roth IRA when you recharacterized the contribution. The contribution amount recharacterized is only $175. Therefore, your IRA contribution worksheet is correct.

@Hawkinsb 

[Hawkinsb]

Thanks a million! @DanaB27