Roth recharachterization exceeded limits

[asmita1478]

My  husband and I contributed to our Roth IRAs in early 2017, BUT we exceeded income limits for that year. So, in March 2018, we recharacterized those contributions to non-deductible traditional IRAs. We filed Forms 8606 with our 2017 joint return along with info on the original contributions and recharacterization. Do we report any of this recharacterization info in our 2018 Turbotax return? I input one of the two 1099-R forms the custodian sent on these recharacterizations, and Turbotax is saying I may need to amend our 2016 return! Why?

[dmertz · Accepted solution]

Upon entering a code R 2018 Form 1099-R into 2018 TurboTax would simply be reminding you that this should have been reported on your 2017 tax return.  (2018 TurboTax's bullet point should say "If you've already filed your 2017 tax return without entering this recharacterization, you'll need to amend it.")  Since you already did that, you can ignore the code R 2018 Form 1099-R.

[asmita1478]

Thank you! So, just so I understand this accurately, I report the amount in 1099-R however, do not enter the code that mentions it was"recharachterized"?

[dmertz]

No, if you enter the code R 2018 Form 1099-R into 2018 TurboTax you must enter it exactly as received.  However, 2018 TurboTax will ignore this Form 1099-R other than to give you the reminder mentioned above.  You can entirely omit this Form 1099-R if you prefer.

[asmita1478]

Many thanks!  The amount that is present on the 1099-R is different (it's more) from the amount I recharachterized last year. If I omit the form 1099-R, I will be omitting reporting the gain it's made int he last year. Will that be okay?

[dmertz]

The amount reported on the code R Form 1099-R is the amount transferred, not the amount recharacterized.  Your 2017 tax return only needed to reflect the amount recharacterized by showing it on Form 8606 as a nondeductible traditional IRA contribution.  Any explanation statement included with your 2017 tax return is where you would have mentioned the gain-adjusted amount transferred.  If you didn't include any explanation statement regarding the recharacterization, there is no point to amending just to add the explanation.  If the IRS ever wants explanation of the recharacterization, they'll ask for it.

Note that you and your husband made nondeductible traditional IRA contributions.  You do not have "nondeductible IRAs" since all IRAs owned by an individual are treated as a single account for the purpose of determining the taxable amount of distributions.

[asmita1478]

@dmertz , Thank you! this helps a lot.