Roth Recharacterization to traditional then back to Roth years later

[Confused1231]

So not exactly sure what info is needed, but in 2021 my wife and I contributed 6k each to Roth IRA.  Then in Jan 2022 I realized we went over income limit so I recharacterized the 6k each + earnings into a traditional IRA.  We did not have a traditional IRA prior so these were new traditional IRAs.  We did have other funds in the roths that were legitimate.  My accounts are with Vanguard.  Her accounts are with Fidelity.

Years go by and then in June 2024 I converted all of the traditional IRA funds to our roth IRAs.  I went back and looked at our 2022 and 2021 tax returns through TurboTax and the 2022 returns do have the sums for the recharacterization.  The 2021 tax returns don't appear to have anything related to these events in them.

A few questions:

1) Do I need to amend the 2021 for any reason or since the recharacterization was in 2022 and is on the 2022 return I am fine on the 2021 return?

2) From reading other posts it seems as though the earnings from the recharacterization would not have been taxed at the time of recharacterization, is that correct?

3) It does not look like a form 8606 was ever filled out, but from reading other posts it seems like since this was not a traditional IRA contribution, but rather, a recharacterization from a Roth one was not needed.  Is this correct?

4) On the now 2024 conversion into the Roth from traditional, how will TurboTax know the basis for when I file for taxes for year 2024?  Since the recharacterized sums included both after-tax contributions and before-tax earnings and, therefore, the conversion from traditional to Roth includes both the original after-tax contribution + before-tax earnings?  Do I just need to let TurboTax know this upcoming years that the original contributions were 6k each?

5) Finally, is there anything I need to do between now and tax return season for year 2024 to correct past years that I have not mentioned?  Whether that be for the IRS or for TurboTax to know the true taxed amounts on the 2024 conversion?

I appreciate the help...this is all new to me.

[dmertz]

"I went back and looked at our 2022 and 2021 tax returns through TurboTax and the 2022 returns do have the sums for the recharacterization.  The 2021 tax returns don't appear to have anything related to these events in them."

I'm not sure what you mean about the 2022 tax returns having the sums for the recharacterization.  There should be nothing on a filed 2022 tax return regarding any of this.  The only thing that should be present is if either of you were covered by a workplace retirement plan, the resulting traditional IRA contributions for 2021 would have been nondeductible, two Forms 8606 showing nondeductible contributions should have been included with your 2021 tax return and the IRA Information Worksheet in your 2021, 2022 and 2023 TurboTax tax files should show this basis in nondeductible traditional IRA contributions.

1)  If not already present on your 2021 tax return, you need to amend 2021 to show the resulting traditional IRA contributions either on Schedule 1 line 20 if deductible or on Forms 8606 if nondeductible.  Also, if the 2021 tax return included any Forms 5329 showing a penalty for an excess Roth IRA contribution, that needs to be corrected as well.

2)  Correct.

3)  Incorrect.  The recharacterization causes the contribution to be treated and required to be reported as a traditional IRA contribution on the 2021 tax return as if the contribution had originally been made as a traditional IRA contribution.

4)  Nondeductible contributions required to be present on line 14 of the 2021 Forms 8606 carry forward to line 2 of the respective 2024 Forms 8606.  Since apparently no 2021 Forms 8606 were originally filed, your 2024 tax file will probably not already show this basis and you'll have to add it manually when you prepare your 2024 tax return.  Had nondeductible traditional IRA contributions been originally correctly reported on the 2021 tax return, this basis would already be carrying forward on TurboTax's IRA Information Worksheets through the years and automatically included on line 6 of the 2024 Forms 8606.

5)  Addressed above.

[Confused1231]

Thanks so much for the info that’s a big help. Just to clarify a couple things.

I say it’s in the 2022 return in that I received a 1099-R with 2022 as the date. I’m assuming this is because I did not do the Recharacterization until 2022. So TurboTax had me put in some info from that on my 2022 since it was dated 2022. Now whether it impacted taxes or not I’m not sure but that’s what I meant about it being on 2022.

Then to clarify amending 2021. I need to do this even though the Recharacterization did not happen until 2022? While the incorrect Roth contribution happened in 2021, I didn’t actually move the money into the traditional until January 2022. Just wanted to clarify I still need to amend my 2021 under that scenario?

thanks again for the help

[fanfare]

Recharacterization:

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.

@Confused1231