Roth IRA Recharacterization-how to report the funds?

[brgog]

As I was completing my 2019 tax return, I found out I had contributed too much to my Roth IRA due to a  higher MAGI. I was able to recharacterize with my broker in 2020 prior to filing but do not yet have any form from them (1099-R or other).

As I am entering the contributions into TurboTax it is unclear whether I should report the amount recharacterized (2580) initially as a traditional IRA contribution with the remainder (3420) as my Roth contribution, or enter the full 6000 as a Roth contribution with 2580 being recharacterized.

It would appear that I should do it the latter way; however, it is still telling me I have an excess contribution unless I state that I withdrew that much of the contribution, which is not the case (all of that money still remains in my IRA)

I can work the math to get it to say I have no excess contribution but am worried it will be reported incorrectly.

[macuser_22]

You will get the 1099-R in 2021.

You enter the Roth IRA contribution in the IRA contribution section and then enter the amount that was "switched" (recharactorized) to the Traditional IRA.   Only you know if you only recharactorized only the excess or the entire contribution.  

The proper way to report the recharacterization and earnings which is to enter the 2018 IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount of the Roth contribution must be entered that was recharactorized - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

That is the only way to prepare and attach the proper explanation statement for a code R 1099-R.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2018 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.

[brgog]

Thank you for the quick response! When I enter it in that way my concern is that it is still telling me I have an excess contribution (of the 2580 that I recharacterized). I can make it  work by saying that I withdrew the 2580 but that I not the case. I am not sure how to move forward without it telling me that I still have an excess contribution. 

[macuser_22]

Sounds like you entered it incorrectly. 

Or your MAGI is over the limit to make any Roth contribution.

Exactly what is the message you receive from TurboTax as to why it is an excess?

If your filing status is...	And your modified AGI is...	Then you can contribute...
married filing jointly or qualifying widow(er)	< $193,000	up to the limit
	> $193,000 but < $203,000	a reduced amount
	>  $203,000	zero
married filing separately and you lived with your spouse at any time during the year	< $10,000	a reduced amount
	> $10,000	zero
single, head of household, or married filing separately and you did not live with your spouse at any time during the year	< $122,000	up to the limit
	> $122,000 but < $137,000	a reduced amount
	> $137,000	zero

[brgog]

I am single and my MAGI puts me in the <122000 but <137000. I am able to make a 3420 contribution without penalty so I recharacterized 2580, which is what it still states is my excess amount. 

[macuser_22]

This is what I get with an AGI of $130,000 and a $6,000 Roth contribution. 

The first 3 screenshots are is the initial contribution and the remaining is the recharacterization of the excess.

Note, that it now tells me that my income is too high to *deduct* the new Traditional IRA contribution so it becomes a non-deductible "basis" on a 8606 form line 1,3 & 14 that will reduce tax on future distributors.  But there is no longer any excess Roth contribution.

[brgog]

Finally got it to work. Thank you so much!