Total Basis in Traditional IRA due to re-characterization

[Chen1991]

For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return. 

For 2023, Turbotax ask me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return."

Am I supposed to entered $0? Or included explanation that $390 was lost in market prior to re-characterization?  Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?  

[DavidD66]

Your basis is $0.  You should change it, and it should not ask you for an explanation after making the change.  One would think it would rollover with a zero basis.  I cant explain why it does not.  

[Chen1991]

Will it have any issue if my 2022 8606 form line 14 has $390? (re-characterization loss during 2022). 

[SusanY1]

To clarify, after you recharacterized to a traditional IRA did you take any deduction?   Did you by any chance convert it back to a Roth after making the recharacterization to a nondeductible IRA (the "backdoor Roth")?  

 

[Chen1991]

I didn’t take any deduction and does not qualify anyway. I re-characterized the contribution and did a backdoor Roth IRA right after. 

[SusanY1]

In that case, the basis should be the $390 and you'll enter an explanation that the reason is the loss that occurred prior to a recharacterization.  

[Chen1991]

The issue is this $390 was already reported on my 2022 tax return as the loss due to re-characterization/conversion (both happened in 2022).

The $390 was on line 14 of the 2022 8606 form. Unsure why this didn’t get carry over when I imported 2022 tax return. Do I need explanation if that’s what my 2022 total basis per 8606? 

[DanaB27]

Yes, you will enter $390 as the prior year basis and enter as explanation "Entering basis as shown on my filed 2022 Form 8606 line 14" since TurboTax is adding an explanation statement. 

I'm not sure why it didn't carry over when you imported the 2022 tax return.