2644013
I had contributed to a Roth account prior to completing my TurboTax entries, only to find I was over the limit for a Roth contribution. So, I am in the process of recharacterizing my Roth contributions as traditional IRA contributions, including reporting the recharacterization in TurboTax. I was expecting TurboTax to confirm that I was making a "non-deductible" contribution to my traditional IRA. Instead, TurboTax is telling me I am making an "excess" contribution to my traditional IRA and that I am subject to the excess contribution penalty.
My questions:
1. I didn't think one could make an excess contribution to a traditional IRA, that excess only applied for a Roth IRA. Why would this contribution trigger an excess contribution penalty warning?
2. I am over 50 so the $7000 involved should not be "excess" anything. With the recharacterization I should be contributing at my limit to the traditional IRA, and no penalty should apply. Why the warning?
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I may have stumbled across the answer to this. When I went back to the IRA contributions summary in TurboTax it showed a total of $14000, not the $7000 I thought I was indicating in the entry screens. It seems TurboTax understands the "I contributed $7000 to a traditional IRA" and the "I recharacterized my $7000 Roth contribution to my traditional IRA" as separate entries and not two sides of the same action. By stating I did not contribute to my traditional IRA and using only the recharacterization of my Roth contribution to my traditional IRA I get the response from TurboTax that I expected.
I would love it if someone from TurboTax can confirm this is the correct approach for my situation.
Yes, that is correct. When you recharacterize a Roth contribution then you will not enter it as a traditional IRA contribution but enter the recharacterization when you enter the contribution to the Roth IRA:
You will get Form 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2021 and this belongs on the 2021 return. But a 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the 1099-R with code R when you get it in 2023. 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.
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