Solved: Report recharacterization of Roth IRA?
Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
Announcements
TurboTax has you covered during Covid. Get the latest second stimulus info here.
cancel
Showing results for 
Search instead for 
Did you mean: 
Level 1

Report recharacterization of Roth IRA?

First time contributing to a Roth IRA and contributed $6k for the 2020 year in the first week of Jan 2021. Received my W2 later and realized the bonus kicked me over the MAGI for max contribution. I recharacterized my Roth IRA into tIRA and then the next day converted it all back to the Roth IRA. I'm using TurboTax to file my taxes and found a link on how to answer the questions for a typical backdoor Roth IRA (i.e. contributing to the tIRA first and then converting all to Roth) but am unsure on how I report the recharacterization. At this point it would just look like I did a typical backdoor Roth but would I need to document the recharacterization as well (I assume the answer is yes but not really sure how). Would I still get any 1099-R forms if I did the recharacterization/conversion in 2021 or would those only come next year and would need to fill out boxes accordingly without?

1 Best answer

Accepted Solutions
Employee Tax Expert

Report recharacterization of Roth IRA?

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

  1. Login to your TurboTax Account 
  2. Click on the Search box on the top and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “Roth IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the Roth contribution amount 
  7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and 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.
  9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes"

You will get two 1099-R in 2022 for 2021.

 

One 1099-R will be for the (backdoor) conversion from traditional IRA to Roth IRA and will be entered on your 2021 tax return. Please see How do I enter a backdoor Roth IRA conversion? for additional detail how to enter this in your 2021 tax return.

 

The second 1099-R will be for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and belongs on the 2020 return. But a 1099-R with code R will do nothing to your return. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

3 Replies
Employee Tax Expert

Report recharacterization of Roth IRA?

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

  1. Login to your TurboTax Account 
  2. Click on the Search box on the top and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “Roth IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the Roth contribution amount 
  7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and 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.
  9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes"

You will get two 1099-R in 2022 for 2021.

 

One 1099-R will be for the (backdoor) conversion from traditional IRA to Roth IRA and will be entered on your 2021 tax return. Please see How do I enter a backdoor Roth IRA conversion? for additional detail how to enter this in your 2021 tax return.

 

The second 1099-R will be for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and belongs on the 2020 return. But a 1099-R with code R will do nothing to your return. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

Level 1

Report recharacterization of Roth IRA?

@DanaB27 - Very helpful, thanks! Regarding the conversion (from tIRA to Roth) - I don't need to document this for the 2020 tax return? Is this because it occurred in 2021 even though it was for the 2020 year?

 

Additionally, say I do a backdoor roth the clean way next time around and before Dec 31 2021 (for the 2021 year) and contribute $6k to the tIRA and then convert to my Roth - will this complicate things for next year?

Employee Tax Expert

Report recharacterization of Roth IRA?

Yes, the 1099-R regarding the conversion from traditional IRA to Roth you don't need to enter on the 2020 tax return because it occurred in 2021 and therefore goes o your 2021 tax return. You will receive the 1099-R in 2022 for your 2021 tax return.

 

No, it will not complicate things if you make another backdoor Roth contribution in 2021. On you 2021 tax return you will enter the traditional IRA contribution and make it nondeductible:

  1. Login to your TurboTax Account 
  2. Click on the Search box on the top 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 contribution amount 
  7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  8. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes"

And then for the 2 conversions you enter the 1099-R(s):

  1. Click on the Search box on the top and type “1099-R”
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA
  5. On the "Your 1099-R Entries" screen click "continue"
  6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  7. Answer the questions about the basis
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
v
Privacy Settings