1. June 2022 (prior to turning 72) I did a Roth conversion of $60K from my rollover IRA. I had not taken my first RMD yet at that point in time.
2. Fall 2022 I turned 72.
3. January 2023, talked to brokerage firm and they processed a Return of Excess in the amount required for the first RMD, about $16K. There was an earnings amount of $250. They said "The amount of earnings returned to you will be reported as taxable income for the year in which the excess contribution was made....This transaction will be reported in IRS Form 1099-R, which will be mailed to you next January. You may also be required to file IRS Form 5329 with your tax return."
So what do I need to enter on my 2022 return? What will I need to enter on my 2023 return?
In order to properly report this on the 2022 Tax Return follow the steps here: How do I enter a backdoor Roth IRA conversion?
For 2023, you will receive a Form 1099-R with the amounts you will need to report for tax year 2023 for the taxable earnings.
Also, forgot to mention that brokerage firm sent Year 2022 1099-R with full 60K gross and taxable amount, code 7, box checked IRA/SEP/SIMPLE.
Regarding the 1099-R you received which reflects the $60,000 amount you rolled over into a Roth IRA as taxable income, did you have a basis in your traditional IRA? The basis in your traditional IRA would be the amount of contributions you made to such account that were non-deductible. The non-deductible contributions would be reflected on Form 8606, Non-Deductible IRAs.
Your traditional IRA basis is important because you would not have to pay tax on that money. Thus, you would subtract your basis from the $60,000 amount to arrive at the taxable amount. If you have no basis in your traditional IRA because you deducted your IRA contributions on your return(s), then the amount you rolled over into the Roth IRA would be taxable income.
@jrl124c