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Level 1

I contributed 6000 to a roth IRA. I was over the income limit so I recharacterized this as a traditional IRA. Then I converted this back to a roth to get around the income limit. The recharacterization and conversion were ~ 7900. What do I do in Turbotax?

 
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Level 15

I contributed 6000 to a roth IRA. I was over the income limit so I recharacterized this as a traditional IRA. Then I converted this back to a roth to get around the income limit. The recharacterization and conversion were ~ 7900. What do I do in Turbotax?


@DanK429 wrote:

I recharacterized in 2019 for tax year 2019. And I did receive two 1099s. One for the Roth to Traditional recharacterization and one for the Traditional to Roth conversion


Assuming the characterization has a code N in box 7 the enter it this way.


A code N 1099-R will put the amount or recharacterization on the 1040 line 4a but not not actually preform the  switch of contribution form Roth to Traditional IRA.

 

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.

The proper way to report the recharacterization and earnings which is to enter the 2019 Roth IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount of the original Roth contribution must be entered - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

That is the only way to prepare and attach the proper explanation statement for a code N 1099-R.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2018 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.

 

Assuming that you converted to a Roth with the other 1099-R you would want this to be non-deductible it could offset the tax on the conversation.

 

Then enter the 1099-R for the conversion.

 

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes.  Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.  

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

3 Replies
Highlighted
Level 15

I contributed 6000 to a roth IRA. I was over the income limit so I recharacterized this as a traditional IRA. Then I converted this back to a roth to get around the income limit. The recharacterization and conversion were ~ 7900. What do I do in Turbotax?

What year was the contribution for and when was the recharacterization done?

Have you received a 1099-R?

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Highlighted
Level 1

I contributed 6000 to a roth IRA. I was over the income limit so I recharacterized this as a traditional IRA. Then I converted this back to a roth to get around the income limit. The recharacterization and conversion were ~ 7900. What do I do in Turbotax?

I recharacterized in 2019 for tax year 2019. And I did receive two 1099s. One for the Roth to Traditional recharacterization and one for the Traditional to Roth conversion

Highlighted
Level 15

I contributed 6000 to a roth IRA. I was over the income limit so I recharacterized this as a traditional IRA. Then I converted this back to a roth to get around the income limit. The recharacterization and conversion were ~ 7900. What do I do in Turbotax?


@DanK429 wrote:

I recharacterized in 2019 for tax year 2019. And I did receive two 1099s. One for the Roth to Traditional recharacterization and one for the Traditional to Roth conversion


Assuming the characterization has a code N in box 7 the enter it this way.


A code N 1099-R will put the amount or recharacterization on the 1040 line 4a but not not actually preform the  switch of contribution form Roth to Traditional IRA.

 

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.

The proper way to report the recharacterization and earnings which is to enter the 2019 Roth IRA contribution in the IRA contribution interview section and then say yes to "Did you switch from a Roth to a Traditional IRA - recharacterize".

The amount of the original Roth contribution must be entered - not any earnings or losses.

Then TurboTax will ask for an explanation statement where it should be stated that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharactorized.

There is no tax or penalty on the before-tax earnings since the earning were simply switched into the recharactorized account.

That is the only way to prepare and attach the proper explanation statement for a code N 1099-R.

Enter IRA contributions here:
Federal Taxes,
Deductions & Credits,
I’ll choose what I work on (if that screen comes up),
Retirement & Investments,
Traditional & Roth IRA contribution.

OR Use the "Tools" menu (if online version under My Account) and then "Search Topics" for "ira contributions" which will take you to the same place.

Since the after-tax Roth contribution is now a Traditional IRA contribution it can be either a before-tax deduction if your MAGI allows a deduction which might result in an additional 2018 refund, or it will be an after-tax contribution reported on a 8606 form (line 1 & 14) as a "basis" in the Traditional IRA that will reduce the tax of future distributions.

 

Assuming that you converted to a Roth with the other 1099-R you would want this to be non-deductible it could offset the tax on the conversation.

 

Then enter the 1099-R for the conversion.

 

Enter a 1099-R here:

Federal Taxes,
Wages & Income
(I'll choose what I work on - if that screen comes up)
Retirement Plans & Social Security,
IRA, 401(k), Pension Plan Withdrawals (1099-R).

OR Use the "Tools" menu (if online version left side) and then "Search Topics" for "1099-R" which will take you to the same place.

Be sure to choose which spouse the 1099-R is for if this is a joint tax return.
Be sure to pick the correct 1099-R type: Standard 1099-R, CSA-1099-R, CSF-1099-R, RRB-1099-R.

[NOTE: When you get to the "Your 1099-R Entries" screen where you can add another 1099-R, use "continue" to keep going as there are additional interview questions after that screen in most cases. You can always return as shown above.]

You will be asked of you had and tracked non-deductible contributions - say yes.  Then enter the total value of any Traditional, SEP and SIMPLE IRA accounts that existed on December 31, 2019.  

That will produce a new 8606 form with the taxable amount calculated on lines 6-15 and the remaining carry-forward basis on line 14.

NOTE: If there is an * next to line 15 then 6-15 will be blank and the calculations will be on the "Taxable IRA Distributions worksheet instead.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post