ROTH recharacterize to Trad IRA

Forum|Forum|5 years ago
June 16, 2021
5 replies
47 views

I contributed 7000 to Roth IRA in 2020 and found out in 2021 that I made too much, so I recharacterized and converted it to a Trad IRA. My problem is in Turbo Tax when it asks "Excess contribution withdrawn before the due date of your return". Should this be a 7000 amount, or does "withdrawn" only apply to withdrawing by taking it out completely, not taking it out and moving it to Trad IRA?

MY143Author

Level 2

I guess I should mention I need to file tonite!!!

macuser_22

Alumni - Champ

You should receive a 1099-R in Jan 2022 to report it, but you can enter it now.

A 2021 1099-R with a code R in box 7 (Recharacterized IRA contribution made for 2020 and recharactorized in 2021) will tell you that you must amend 2020.

A code R 1099-R does nothing whatsoever if entered into the 1099-R section of an amended 2020 return. It does not get sent to the IRS and nothing goes on the tax return at all. The only purpose of the 1099-R is to report the recharacterization to the IRS, but it still must be reported on your 2020 tax return.

The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

The proper way to report the recharacterization and earnings which is to enter the 2020 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 The amount of the original Roth contribution must be entered - 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 2020 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.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

MY143Author

Level 2

I was asking about the "withdraw" question which when I enter 7000, makes lines 33..37 in the "IRA Information Worksheet" all blank and no Form 5329 is even generated. I think I should answer 0 to the question?