IRA Cleanup

[msgrinnell]

Mostly because I am really stubborn I believe I have some cleanup this year.   

1. Tax time 2022 I found out my wife and I were over MAGI limit to contribute to Roth for 2021. 
2. Being stupid and not knowing better at the time, in April 2022 I withdrew the $7000 I had put in my Roth and put that amount in a new Traditional IRA thinking I had fixed the problem.   
3. Learning something in the meantime, a few days later I used the recharacterization function Fidelity offers to recharacterize the $7000 we invested in my wife's Roth IRA throughout 2021.  
4. In the meantime, we were investing monthly to our Roth IRAs for 2022 to ultimately max them out at $7000 each for the year.   
5. I received a 1099-R with P and J codes. 
6. My wife received a 1099-R with R code. 
7. What precisely are my current problems and how do I fix them?  

[DanaB27]

You don't enter Form 1099-R with code R because it won't make any changes to your return. You will need to report the recharacterization on your 2021 tax return with the steps below:

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 ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. 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.
10. 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 warning and then a screen saying $0 is deductible.

Form 1099-R with codes P and J will have to be entered on your 2021 tax return (if you didn't create a Form 1099-r in 2021):

1. Login to your TurboTax Account 
2. Click on the "Search" on the top right and type “1099-R” 
3. Click on “Jump to 1099-R”
4. Enter the Form 1099-R with codes P and J information
5. On the "Which year on Form 1099-R" screen say that this is a 2023 Form 1099-R.
6. Click "Continue" after all 1099-R are entered and answer all the questions.
7. Continue until "Did you use your IRA to pay for any of these expenses?" screen and enter the amount of earnings under "Another reason" if you are over 59 1/2 (if you are under 59 1/2 click "Continue")

Please be aware, code P will say in the drop-down menu "Return of contribution taxable in 2020" you can ignore that since the follow-up question will tell TurboTax that it will be taxable in 2021.

Please see How do I amend my federal tax return for a prior year? for additional information.

[msgrinnell]

Hi Dana -- actually, this ended up being a much bigger problem.  Essentially, there is a paperwork problem at Fidelity which has been ongoing for about a year.  I talked to a tax person locally and they said my best bet was to try and get fidelity to fix it but in the meantime submit my return with the numbers as best as I can do.