Roth IR Recharacterization and Backdoor Roth

[MrTani]

Hi all,

I had to recharacterize my Roth IRA contributions (made in 2022) to Traditional IRA in 2023. Before tax day 2023, I want to convert this recharacterized amount from Traditional IRA to Roth IRA. Yet, I am unsure of how to reflect this in Turbo Tax.

Recharacterization: I followed the steps for recharacterization outline multiple times here in the forum, e.g. @Recharacterization of Roth IRA - that was easy enough: 

1. Select “Roth IRA”
2. Answer “No” to “Is This a Repayment of a Retirement Distribution
3. Enter the Roth contribution amount 
4. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and and enter the amount (no earnings or losses)
5. 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.

Conversion: How should I report the backdoor Roth IRA now in my 2022 taxes, i.e. the conversion of my recharacterized amount - given that I needed to do the recharacterization first and now want to do a backdoor Roth IRA conversion? Or is this something I would only enter in my 2023 taxes next year and I am all set with the recharacterization inputs?

[DanaB27]

Yes, you are done with your 2022 recharacterization/ backdoor entries. Your conversion will be reported next year on your 2023 tax return since the conversion was made in 2023. You will have the basis on your 2022 Form 8606 line 14 to carry over to your 2023 return.

To enter the conversion next year on your 2023 tax return:

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” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" 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 from line 14 of your 2022 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[MrTani]

Thank you! That is helpful!