Entered wrong numbers for 2020 IRA contribution, how to amend?

[dhuynh44]

Hi all,

My wife and I did backdoor Roth conversions in 2020.  I believe we entered the 1099-R numbers (amount converted) TurboTax on 8606 form instead of our nondeductible contributions.  We also recharacterized some of this contribution in 2021, for year 2020 so TurboTax is asking us to amend it.  

My question is, when I amend 2020, can we fix the wrong contribution entered wrong from 2020 as well as add our recharacterization at the same time?  After we fix it, can we send it in paper or electronic?  How long do I have to wait after I submit the amendment can I finish our 2021 return, or do we have to wait for a response?  

do we have to amend 2020 before moving forward with our 2021 return?

We have never amended anything.  Thank you 

[DanaB27]

Yes, when you amend your 2020 tax return then you can correct everything. Please see How do I amend my 2020 return?. For years prior to 2021, you'll need to print and mail your amended return.

After filing your 2020 amended tax return you can start working on your 2021 return. You do not have to wait for the amended return to be processed. 

On your 2020 tax return you will enter the recharacterization when you enter the contribution to the Roth IRA

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible)

You should have received a Form 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and this belongs on the 2020 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 Form 1099-R with code R. 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.

[dhuynh44]

@DanaB27 

Hi, thanks for the info.  you mentioned I have to report the 1099-R, but then you mention I should ignore it.   Did you mean I can ignore the 1099-R on my 2021 return but enter it on my amended 2020 return?

Also; how do I fix the incorrect numbers I entered for line 1 and line 14 etc on my 2020 return?   Instead of putting the exact after tax contributions we put the amount converted. Thank you 

[DanaB27]

Yes, I was referring to that the recharacterization belongs on the 2020 return but you do not need to enter Form 1099-R with code R because you report a recharacterization as mentioned in the steps above. Entering a Form 1099-R with code R will not make any changes to your return.

To fix the entries on Form 8606 you will enter your nondeductible IRA contribution under Deductions& Credits. If you only had the recharacterization then just make sure to make it nondeductible in Step 9 in the instructions above (or it will be automatically nondeductible if you had a retirement plan at work and too much income).

If you had additional traditional IRA contributions you will enter them when you enter the recharacterization:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select "traditional IRA"
5. Select “Roth IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the traditional IRA contribution amount 
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer “No” to “Is This a Repayment of a Retirement Distribution
10. Enter the Roth contribution amount 
11. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
12. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
13. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible)

[dhuynh44]

Thanks for the answer and please forgive my question, I’m just understanding everything.  So the 1099-R with recharacterization code R, I do not put this on my 2021 but only my 2020 amended return right?

and What is step 9 that you mentioned above? 

[DanaB27]

No, you will not enter the 1099-R with code R on your 2020 or 2021 tax return because you report the recharacterization with these steps when you enter the contribution to the Roth IRA:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “Roth IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the Roth contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.
9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible)

Step 9 I was referring to was in the instructions above: "On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" (if you are thinking about doing a backdoor Roth. If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible)"

If you have any other questions, please respond with your question in the thread and I'm happy to assist you further.

[dhuynh44]

Thank you!  So, since I recharacterized in 2021 for 2020, I should be performing this for 2020 amended return correct?

[DanaB27]

Yes, since the recharacterization was for a 2020 contribution you will enter it on your 2020 return when you amend your 2020 return.