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ojmn
Returning Member

Roth Recharacterization to Traditional IRA and Backdoor Roth IRA

I have hard time trying to properly enter Roth recharacterization to Traditional Roth and back to converting them to Backdoor Roth for tax year 2023 ( and filing in 2024). 

 

I had incurred some gain and I did get two 1099-R forms and two 5498 Forms. Here are the details.  

 

For 2023 my original contribution was $6,500 in Roth IRA  in early January 2023, recharacterized this to Traditional IRA after realizing limitation, by this time fidelity suggested to transfer  $6,905.16 and after few days transfer back from traditional IRA to Roth $6,908.14 for backdoor Roth ( I didn't had any amount in my traditional IRA before so this ~$2 is gained in Traditional IRA).

 

I did had basis from 2022 line 14: $5612. There is no other basis in any previous year.

 

Roth IRA form 1099-R

1. Gross distribution: 6905.16

2a. Taxable amount 0

7. N

 

Traditional IRA form 1099-R

1. Gross distribution 6908.14

2a. Taxable amount 6908.14

2b. both with check marks

7. 2, X on IRA/SEP/SIMPLE box

 

I followed all the steps for recharacterization, explanation steps and entering 1099-R ( for Traditional IRA ) from TurboTax guideline as in other community threads. 

 

My Questions are:

1. Should I use both 1099-R form ( from Traditional IRA as well as Roth IRA )  in TurboTax ?

2. TurboTax seems to have confused if I use both of the 1099-R, is there any other way to handle Recharacterization along with backdoor Roth conversation ?

3. I think my gain $408 ( $6908-$6500) taxable, is that correct ? If so, TurboTax seems to not adding this my overall earning, so how to fix this ?

Thanks,

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2 Replies

Roth Recharacterization to Traditional IRA and Backdoor Roth IRA

If TurboTax looks confused, you are not answering the followup questions correctly

That's not your fault; the questions themselves are confusing.

---

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings move but are ignored.
You must use a trustee-to-trustee transfer before the due date April 15,2024.
You will instruct trustee to calculate the allocable earnings.

report this on your tax return for the year during which the contribution was made.
Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA.

--

In other words, ignore and discard a 1099-R Code "N"  from your Roth IRA.

As far as IRS is concerned., the money went into the second IRA (Traditional IRA).

You probably want to mark it a non-deductible contribution.

 

@ojmn 

 

Roth Recharacterization to Traditional IRA and Backdoor Roth IRA

After a deduction of $6,500 for a contribution,

a conversion of $6,908 results in a net taxable income rise of 408 dollars.

 

You must be eligible for the deduction.

@ojmn 

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