Recharacterization

[scienceking]

I contribute $200/month into a Roth IRA.  This year, my wife and I made too much and have an excess contribution.  I'm trying to recharacterize this and am not sure how to fill this out in Turbo Tax Deluxe.  The first thing I did was go to my TIAA account and did the recharacterization for $2400.  I put into Turbo tax that all $2400 has been recharacterized and now I'm on the section that asks me to fill out the date of contribution, date of recharacterization, reason and total amount, including earnings and losses.  I'm not sure how to account for the monthly contribution in the date section and now it would appear I need to go back and recharacterize more because overall, that account grew in value throughout 2020.  How do I calculate this change in value for each month on a contribution of $200 in an account that has $50,000 in value.  

[dmertz]

The dates are intended to define the computation period for the earnings calculation.  In this case, the beginning of the computation period is the date that you made the first contribution for 2020.

The rate of growth has no bearing in the the amount that you recharacterize.  The rate of growth only affects the calculation of the amount to be transferred.  The amount transferred is the amount recharacterized, $2,400, plus the attributable earnings.   You can't recharacterize more than the $2,400 contributed, nor is there any need to do so.  Don't confuse the amount to be that must be transferred with the amount being recharacterized.

Example 2 of CFR 1.408-11 describes how to calculate the gain when there have been multiple contributions:

https://www.law.cornell.edu/cfr/text/26/1.408-11

I your case, the Adjusted Opening Balance is $2,400 plus the balance immediately prior to the first contribution made for 2020.  The Adjusted Closing Balance is the balance immediately prior to the recharacterization.

[scienceking]

Thanks for this info.  This deviates a little bit (I think) from what TIAA told me.  They said they can do the necessary calculations and that I'd report the $2400 + any earnings as being recharacterized.  So, I would in essence be recharacterizing more than $2400.  Maybe I misunderstood them.

In turbo tax it would appear I put $2400 down as the amount recharacterized and then I put a different amount in for what I transfer from Roth to Traditional (this is what you are telling me I believe).

I guess I need to clear things up with TIAA.  Sounds like I fill out the necessary recharacterization form for $2400, get the appropriate calculations, and then transfer from the Roth to the IRA the appropriate amount.

[dmertz]

All correct.  Upon requesting TIAA to recharacterize $2,400 (the amount that you will tell TurboTax was recharacterized), TIAA should do the earnings calculation and do the transfer of both the earnings and the recharacterized amount on your behalf.

[scienceking]

Thank You!