Reporting a Recharacterization for Backdoor Roth IRA

[ales01]

Hi, I was wondering if someone could walk me through entering my recharacterization and Backdoor Roth IRA into turbo tax based on my situation:

- In 2024 I contributed I contributed $7,000 directly into my Roth IRA and purchased some stock

- In January of 2025 I realized I was above the limit Roth IRA limit the prior year and proceeded to perform a recharacterization in the form of the stock shares. By that time my shares had increased in value to $10,277. During the 1-2 days it was in my traditional IRA, the value increased to $10,626, and that's what was ultimately transferred back to my Roth IRA

- In April 2025 I submitted my taxes for the 2024 year with form 8606 (line 1: 7000, line 3: 7000, line 14: 7000)

- In December 2025 I contributed $7,000 into my traditional IRA and rolled it over into my Roth IRA performing a Backdoor Roth contribution for 2025. Unfortunately, 66 cents were left in my traditional IRA on January 1, 2026, and I have left it there since

- Below are my 1099-Rs from 2025 and my 5498 from the 2024 tax year. I have not received the 5498 for 2025 (and suspect I won't before the tax deadline in April 2026)

Roth IRA form 1099-R

1. Gross distribution: 10277

2a. taxable amount: 0

7. R

Traditional IRA form 1099-R

1. Gross distribution: 17626

2a. Taxable amount 17626

2b. Taxable amount not determined and total distribution are both marked with X

7. Distribution code 2, IRA/SEP/SIMPLE box marked with X

Roth IRA form 5498 from 2024

5. fair market value of account

7. IRA type Roth IRA

10. Roth IRA contributions 7000

Questions:

1. Are you able to provide me a step by step guide based on my numbers? I've walked through it myself but I get confused based on the wording of the questions and I'm unsure if I've done it correctly. I have Turbo Tax Deluxe for Windows.

2. When I went through it myself I was prompted that I might need to amend my 2024 taxes I submitted last year. It didn't provide any information on what I would need to amend. Based on the information I've provided did I make a mistake with my reporting last year on form 8606?

3. My understanding is I'll have to pay taxes on the gains I recharacterized (e.g. 10,277 - 7,000 = $3,277). Where does this get reported?

4. During my recharacterization my $10,277 increased to $10,626 while in my traditional IRA. It was in the form of stock. Is this an issue, and how do I report it?

5. How do I report the 66 cents in my traditional IRA? My plan is to perform another backdoor Roth IRA this year and just make sure my traditional IRA sits at $0 before December 31, 2026

Appreciate all the help!

[baldietax]

1. Are you able to provide me a step by step guide based on my numbers? I've walked through it myself but I get confused based on the wording of the questions and I'm unsure if I've done it correctly. I have Turbo Tax Deluxe for Windows.

Just follow the standard steps for backdoor Roth in 2025, in 2 parts - enter the 1099-R for the full Roth conversion and following questions to identify it as a Roth conversion, you had 0.66 cents left as your MV as of 12/31/25 (Turbo may prompt you need Form 5498 but this is misleading, IRS instructions are to use year-end statements available in January); and enter the 2025 non-deductible contribution.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/retirement-benefits/enter-backdoor-roth-...

2. When I went through it myself I was prompted that I might need to amend my 2024 taxes I submitted last year. It didn't provide any information on what I would need to amend. Based on the information I've provided did I make a mistake with my reporting last year on form 8606?

Which question prompted this... I am not seeing why you would need to amend your 2024 taxes if you included the Roth re-characterization in 2024 and ended with 2024 Form 8606 Line 14 = $7000.  It may be referring to the basis if you had to amend that question for some reason (e.g. 2024 data wasn't carried over).

3. My understanding is I'll have to pay taxes on the gains I recharacterized (e.g. 10,277 - 7,000 = $3,277). Where does this get reported?

This will fall out from the tax calculation on Form 8606 and you should see this on Form 1040 Line 4b.  You did a Roth conversion for $17,626 and had a $14,000 basis in the IRA so 14k will be tax-free and the rest will be taxable.  The gains you re-characterized are included there.

4. During my recharacterization my $10,277 increased to $10,626 while in my traditional IRA. It was in the form of stock. Is this an issue, and how do I report it?

Same as #3 - this is included in the taxable difference between the MV you converted and your 14k basis in the IRA

5. How do I report the 66 cents in my traditional IRA? My plan is to perform another backdoor Roth IRA this year and just make sure my traditional IRA sits at $0 before December 31, 2026

Just respond to the question about your MV as of 12/31/25.  Your 0.66 will be rounded up to $1 on Form 8606 Line 6 and may get left behind as $1 basis in your IRA carried over to 2026.  When you clean it up $0 this year then that basis will get relieved.  See also this article

https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/

Not a CPA but above is my understanding based on what you laid out - hope this helps.

[baldietax]

P.S. my assumption is this 1099-R was for tax year 2024 and it was in your 2024 taxes to take care of the recharacterization then

Roth IRA form 1099-R

1. Gross distribution: 10277

2a. taxable amount: 0

7. R

[baldietax]

I was thinking more about the above and I think my assumption was wrong and I am supposing that the 1099-R with Code "R" was received for 2025, code R is "Recharacterized IRA contribution made for 2024 or a previous year.".  Entering this 1099-R triggers the prompt you are asking about that you may need to amend your 2024 taxes.  See thread below and you can probably find others - 1099-R with code "R" does nothing to your return in 2025, and you need to have recorded the recharacterization in 2024 hence that prompt - but if you did that then there is presumably nothing to amend.  I think from 2025 perspective as long as you have the right basis carryover from 2024 then the rest of your 8606 should work out fine.

https://ttlc.intuit.com/community/taxes/discussion/prior-year-roth-recharacterization-and-possible-a...

[baldietax]

see similar question, with comments on 2024 return from @DanaB27

https://ttlc.intuit.com/community/retirement/discussion/excess-roth-for-2024-was-recharacterized-to-...

[ales01]

Thanks baldietax! @DanaB27  would you be able to help clarify some of these steps? I've read a lot of your other posts and they've been super helpful. Appreciate your time.

[DanaB27]

Generally, you will enter the recharacterization when you enter the Roth IRA contribution and select you recharacterized it. Then TurboTax will add an explanation statement. It seems you entered recharacterization correctly on your 2024 return and made it nondeductible since you had the 2024 Form 8606 with the 7,000 basis on line 14.

The gain in the Roth IRA before the recharacterization is deemed to have been made in the Traditional IRA since you recharacterized the contribution.

You can ignore the 2025 Form 1099-R with code R since it belongs on the 2024 return but won’t change anything in your 2024 return.

On your 2025 return you will enter the nondeductible contribution to the traditional 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 “Traditional IRA”
5. Enter the $7,000 contribution amount 
6. On the screen "You have deductible traditional IRA contributions of $XXX" enter $7,000 as the amount you want to make nondeductible (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically)

To enter the Form 1099-R conversion: 

1. Click on "Search" on the top right 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" screen and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R summary" screen click "Continue"
6. Answer "Yes" to "Did you have any nondeductible IRA contributions to your traditional IRA from 2024 or prior years?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the $7,000 basis from line 14 of your 2024 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs ($0.66 rounded up $1 assuming this was your only IRA).

 Part of your conversion will be taxable on line 4b of Form 1040 since you had a gain.

@ales01 

[ales01]

Thank you so much @DanaB27 ! I was wondering if I could clarify some of the steps with you to make sure I did this correctly:

• 1. I checked both here because technically I contributed, even if it was via backdoor. Is that correct?

2. I put in $7,000 here, and wanted to make sure that I was not supposed to put $17,277 (e.g. backdoor roth for 2024 tax year, done in February 2025 + backdoor roth for 2025 tax year done in December 2025)

3. Same question as the last screenshot.

4. I only entered the recharacterization for my 2025 tax year contribution. Is there somewhere I need to enter the recharacterization done in February 2025 for the 2024 tax year, or is what I've done correct?

5. Selected yes, as recommended.

6. I didn't put anything because I did a backdoor roth contribution.

7. This question came up because I told turbotax I had a Roth IRA before 2024. I think I've had my Roth IRA since around 2015. Did they want me to put all my cash contributions here prior to 2025 (not including my recharacterizations?)? I left it blank and it didn't seem to affect anything as far as I could tell.

8. I selected "no" because I never did a recharacterization before 2025.

9. I selected "no", but wasn't sure if this was correct because technically I had that excess contribution of approximately $3000 because of the gains in my traditional during the recharacterization. Should I say "yes" ?

10. Did I enter these fields correctly? The $1 is the extra left in my traditional IRA, and the $17,627 is from my Traditional IRA 1099-R for 2025 (both of my backdoor roth IRA contributions from this year + my gains that were made in my traditional IRA.

11. Where does the $14,127 taxable amount come from?

12. Just wanted to make sure this looks correct.

[DanaB27]

1. You only need to check Traditional IRA since you only made a Traditional  IRA contribution in 2025. Unless you want TurboTax to keep track of your prior years Roth IRA contributions.

2. Yes, you enter the Traditional IRA contribution of 7,000.

3. Don't enter anything on this screen, this is for recharacterizations. You made a conversion in 2025, this will be entered in the retirement section when you enter your 1099-R.

4. Delete the recharacterization screen.

5. Yes, you will select "yes" here and enter the basis from your 2024 contribution ($7,000) on the next screen.

6. Correct you do not enter a Roth IRA  contribution.

7. Yes, you can enter your prior year Roth IRA contributions if you want TurboTax to track your basis. Do not include the amount that was recharacterized in 2024. 

8. Correct if you never converted anything to Roth IRA. Note, recharacterization and conversion are different. 

• Recharacterization from a Traditional IRA to Roth IRA is pretending you never made the contribution to the Traditional IRA, you pretend you only made it to the Roth IRA. This can only be made by the due date. 
• Conversions to Roth IRA can be made anytime and is moving the funds from Traditional IRA to Roth IRA (you did this in 2025).

9. You select "No" since you fixed your Roth IRA excess contribution in 2024 by recharacterizing it as a Traditional IRA. You shouldn't have had an excess contribution since the gains are deemed to have been earned in the Traditional IRA because of the recharacterization. When you convert the funds from Traditional IRA to Roth IRA the gains will be taxable but it will not trigger excess contribution because it is not a new contribution to the Roth IRA.

10. Yes, the value of $1 is entered correctly. 

No, you do not enter anything under outstanding recharacterization. You made a conversion. Please delete the entry.

11.  The incorrect taxable amount results from a few wrong entries once you fix them it should show the correct taxable amount.

12. No, you should show a Traditional IRA contribution. Once you delete the recharacterization during the IRA contribution interview this should be fixed.

@ales01    

[ales01]

Hi @DanaB27  , thanks so much for going through that. I made the changes you suggested and a lot of the windows I was seeing previously disappeared. I realized I might not have been clear about the process and wanted to clarify something.

The 2024 Roth IRA contribution produced gains that occurred while in the Roth IRA, which amounted to $3,277. I performed the recharacterization in February of 2025 for a total of $10,277 in the form of stock, and during the 1 day this was sitting in my Traditional IRA, the amount increased to $10,627, which was then put into my Roth IRA. So in total, $3,277 of gains were made in my Roth IRA, and $350 was made in my tIRA. Does that change any of the answers to the screenshots that you provided above?

The reason why I'm asking is because here's what my form 8606 looks like when I entered everything:

Line1: 7000

Line2: 7000

Line3: 14,000

Line5: 14,000

Line10: x

Line13: 7000 *

Line14: 7000

Line15a: 0

Line15c: 0 *

Line16: 17,627

Line17: 7000

Line 18: 10,627 *

1. My understanding is for form 8606, line 6 should be $1 (because I left 0.66 in my tIRA on 12/31/2025), line 8 should be 17,627 (total amount I converted from tIRA to Roth IRA in 2025, including earnings), lines 9-11 should be the pro-rata calculation. These lines (6,8,9-11) are currently blank, except for an "x" in line 10. Did I do something wrong?

2. Line 18 shows the taxable amount to be 10,627. My understanding is that the taxable amount should be 3,627, because it's only taxing the gains beyond my original 7,000 contribution. Am I correct?
3. Some of the lines have an asterisk next to the number entered (line 13,15c,18). Do you know what that means? I didn't see an explanation at the bottom of the form explaining the *

[DanaB27]

1. and 3. The lines are blank since TurboTax is using the Taxable IRA Distribution Worksheet according to Pub. 590-B, indicated by the *.

2. Yes, only the gains of $3,627 should be taxable. I like to take a look at your return to figure out what is going on.. You can send us a “diagnostic” file that has your “numbers” but not your personal information. If you would like to do this, here are the instructions for TurboTax Online: 

1. From the left menu select Tax Tools. 
2. Then select Tools below Tax Tools. 
3. A window will pop up which says Tools Center.  
4. On this screen, select Share my file with Agent. 
5. You will see a message explaining what the diagnostic copy is. Click okay through this screen and then you will get a Token number. 
6. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

The instructions for TurboTax Download: 

1. On your menu bar at the very top, click "Online"
2. Select "Send Tax File to Agent"  
3. Click "Send"
4. The pop-up will have a token number
5. Reply to this thread with your Token number and add @DanaB27 . This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@ales01 

[ales01]

Hi @DanaB27 , I must've made a mistake answering the questions when I imported my 1099-R forms. I re-imported the forms and this is what I have for my form 8606 now:

Line1 7000
Line2 7000
Line3 14000
Line5 14000
Line10 x
Line13 13999 *
Line14 1

Line15a 0

Line15c 0 *

Line16 17626
Line17 13999
Line18 3628

1. Form 8606 looks correct now as far as I can tell. Line 6 is blank, but line 14 I think captures the $1 I left in the traditional IRA at the end of 2025. Does this look correct to you? I'm guessing there was some rounding done in the calculations, which is why turbotax ended up with $13,999 instead of $14,000 for lines 13 and 17.

2. When I was entering my traditional IRA 1099-R I encountered the question below and selected "yes." Is "yes" the correct answer, even though I left 0.66cents in the traditional IRA? Technically I believe I converted all of it, and the 0.66cent was leftover from interest, which is why I selected "yes"

[DanaB27]

1. Yes your Form 8606 entries look correct. 

Yes, the $1 difference was caused by rounding when the pro-rata rule was applied because of the $0.66 cents left in the account.

2. Yes, is correct for the question if you convert all of the amount from box 1 of your Form 1099-R to Roth IRA.

@ales01 

[baldietax]

Looks good.  the *s after the lines indicate Turbotax is using a separate calculation worksheet which is why some of it doesn't show on Form 8606 directly.

Saying "Yes" to converting all to Roth is correct, it's referring to the amount of the 1099-R not the market value of your IRA.

The 0.66 you left behind and presumably answered as the 12/31/25 market value gets rounded up to $1 which is why your basis applied to the conversion was $13999 not $14000 and you have $1 on Line 14 carried over as basis to 2026.  When you do a backdoor in 2026 you would convert the penny earnings to Roth to get the Trad IRA down to $0, and that $1 will get applied to that conversion.  See

https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/

[ales01]

Thank you so much for your time y'all! Appreciate you going through each of my questions patiently @DanaB27  🙂