Roth IRA 2020 contribution recharacterized and converted in 2021 + backdoor, 2 1099-R received in 2022

[rachbutts13]

Hello! 

I contributed $5500 to my Roth IRA in 2020. Upon filing my 2020 taxes in March of 2021, I realized I was over the income limit and recharacterized the contribution from 2020 (now $7019) into a Traditional IRA. Upon settlement, I then proceeded to do a backdoor conversion of the assets back into my Roth IRA (now $6992). 

Fast forward to 2022 - I contributed $6000 into my Traditional in March of 2022 as a prior-year contribution (aka for 2021) and immediately then converted those assets into my Roth IRA. 

My question is....

What on earth do I need to report in turbo tax for my 2021 filing?!? I received two 1099-Rs for 2021 - one for the Roth IRA amount of $7019 and coded as R, and then a second for the Traditional IRA amount of $6992 coded as 2. Do both need to be included in my return? And how do I then report the conversion I completed for 2021 (since both of these 1099-Rs were technically for 2020 contributions). 

Any help/guidance would be appreciated! 

[DanaB27]

You can ignore the 2021 Form 1099-R with code R it belongs on the 2020 return but a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned below. Therefore, you can ignore Form 1099-R with code R.

On your 2020 tax return 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 “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 enter the contribution 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" (since you are thinking about doing a backdoor Roth. 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)

TurboTax will create the 2020 Form 8606 with a basis on line 14. This basis will have to be entered during the 2021 interview when TurboTax asks.

On your 2021 tax return enter the nondeductible contribution to the traditional IRA for 2021:

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. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2020 Form 8606 line 14 (if you had a basis in the prior year)
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (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).

To enter the 1099-R conversion (code 2): 

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 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

You will have a basis carried forward to 2022 on your 2021 Form 8606 line 14 since you converted the 2021 contribution in 2022.