Traditional IRA Recharacterization and Roth IRA Conversion

[kknguyen_ca]

Hi TT community, need some help and guidance. 

In 2018 calendar year, I had contributed $5500 into my Roth IRA. When Jan 2019 came around, I realized my MAGI was too high so I had to re characterize a portion of my Roth IRA to a Traditional IRA. This portion came out to be $2570 + gains. After moving this out, I converted it into my Roth IRA again (backdoor Roth) and voila.  This was done in Jan of 2019.  There was no 1099 generated for the recharacterization and conversion due to me doing it in Jan 2019.

Also in 2019, I moved $6000 into my traditional IRA and backdoored it into my Roth IRA.

So now in Jan 2020, my bank generated the 1099 tax forms, one for my re-characterization ($2616.50 = $2570 + gains) and one for my traditional IRA contributions ($8616.52 = 6000 + 2616.52).

So my questions are 

1. In 2018, because I did not have the generated forms, I only put down $2570.00 on my form 8606 re-characterization.  This was done by TurboTax and talking to the advisers.  Now that I have the 1099 form for the re-characterization, how do I go making this amendment? The 1099 shows $2616.50 with distribution code R. 

2.  My 1099 for my traditional IRA contributions shows $8616.52.  Technically for 2019, only $6000 was contributed into my IRA and for 2018 it was $2616.52 (the recharacterization),  How do I report this for my 2019 tax returns?   I then converted this sum back to my Roth. 

Thanks for any help

[MikeinSC]

Since the recharacterization technically did happen in 2019, and that is what the 1099’s are showing, I would do the current 8606 as if you did not file one last year (you paid no tax on it anyway and would not amend the return but put everything into this year.)

Current year IRA of $6,000, prior year basis of $2,570 = total basis in IRA of $8,570.  Total distributions of $6,000+$2,617=$8,617 - taxable distribution will be the difference of $47.  (Your item 2 says “1099 for traditional IRA contributions shows $8616.52” - I assume you mean it shows DISTRIBUTIONS of that amount (1099’s are for distributions not contributions.). 

[kknguyen_ca]

Yes. Distribution, not contribution. 

Ok I will see if this works. Thanks!!!!

[dmertz]

1.  $2,570 is the correct amount to have shown on line 1 of your 2018 Form 8606, no need to amend if that's what it showed.  The higher amount is the amount that was transferred, not the amount recharacterized.

2.  Your Form 1099-R shows the amount distributed from your traditional IRA in 2019.  Your 2019 Form 8606 should show $6,000 on line 1, and $2,570 on line 2 (with amount on line 2 coming from line 14 of your 2018 Form 8606).  Assuming that you had no money in traditional IRAs as the end of 2019, the resulting taxable amount of your Roth conversion is $46.52 (rounding to $47) and is the amount that should be present on line 18 of your 2019 Form 8606.

[kknguyen_ca]

Thanks so much.  That makes sense.