☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 2
posted Mar 7, 2025 6:42:36 AM

Incorrect ROTH IRA Recharacterization from prior years

Hello,

 

I have used a CPA to file my tax returns for past several years, and decided to switch to just doing taxes on my own using turbotax.  Turns out this was a good thing because I noticed there were lots of errors on my prior years tax returns. 

 

  • First time I had recharacterization was in 2020. I think that one was most likely fine the error was minor and not material. 
  • The following year 2021, I had another recharacterization, but this one it appears my broker sent the full recharacterization amount as a distribution with box stating cost basis not avaiable, but my CPA just took the full amount as a recharacterization (which ended up in over taxation to me). 
  • Then in 2023, I had another rechracteization, but this was completely missed by my CPA it was not even on my tax return.  However, I think the taxable amount on it is probably pretty low given that I have not been taking deduction on the Traditional IRA contributions due to income limits.  
  • In 2024 I had another recharacterization.  Again i think my taxable basis is very small, but my brokerage firm did send the 1099 with full distribution amount and I need to recalculate the basis. 

 

My question is with all of these past errors, can i just file 2024 tax return with "trued up" tax basis (I assume the taxes I paid on 2021 outwieghts any tax liabilities i would have owed in the subsequent years)? And is the best way to do this by just overriding the 1099 data that TT imported?  Thank you for your help in advance!

 

0 2 2917
2 Replies
Expert Alumni
Mar 7, 2025 7:04:32 AM

I think what you are saying is that you overpaid but also underpaid taxes in past years but it mostly evens out, so no sense in going back and correcting everything. Also, there was no attempt to defraud the government as you were unaware of the misreporting. If you got audited penalties would be assessed on your tax due but the correct thing to do would be to file amended returns. You can only amend a return for a refund going back three years from the due date of the return, so if you needed a refund for overpayment of tax in a year beyond that timeframe to offset a tax due from another year, it may not be available to you.

 

Also, Form 8606 Non-Deductible IRAs would need to reflect your correct cost basis. You can accomplish this through your answers to questions after your enter the 1099-R forms in the current year. It may also be helpful to use the desktop version of TurboTax as you can work directly on the forms in many instances.

 

[Edited 3/7/25 at 9:02 AM PST]

@michinori-kaneko 

Level 2
Mar 7, 2025 7:07:53 AM

Got it thanks. I think i'm less worried about the overpayment from years ago since it is what it is.  I'm assuming if I haven't gotten anything from IRS by now safe to assume my 2023 returns were fine from their eyes so i will just report with trued up cost basis for 2024. THank you for your inputs!