Late Backdoor Roth IRA recharacterization/conversion

[gmcadams]

Trying to figure out how to handle this situation from 2021/2022.

I contributed $4,200 to my Roth IRA at the end of 2021. However, I realized that I made over the limit to contribute to a Roth IRA, so in March 2022 I recharacterized it (now worth $3,600) into a Traditional IRA, and then converted that back into the Roth IRA (i.e. backdoor Roth). The problem is, my broker did not issue me a 1099-R for 2021. So in 2022, I did a regular backdoor Roth for $6,000, but now my 1099-R for 2022 shows $9,600! (conversion amount for 2021 + 2022).  Also, I now have a 2022 1099-R for my Roth IRA showing a gross distribution of $3,600 as distribution code R.

How do I fix this? Should I go back and amend my 2021 tax returns? I tried doing this through TurboTax (I filed myself there in 2021), but it asks Did you get a 1099-R in 2021? Since I didn't, I hit No and can't go through the process.  Should I select Yes even though my broker didn't give me a 1099-R for 2021?

[fanfare]

recharacterization: the original amount to the first IRA you report as contribution to the second IRA, earnings are ignored.
report this on your tax return for the year during which the contribution was made.

So yes, you have to amend 2021, showing a Traditional IRA contribution of $4,200, which should be elected as non-deductible. Attach 2021 Form 8606.

[fanfare]

Do you have the correct taxable amount on 2021 Line 4b and did not take a deduction?
After you e-File,
get Form 1040-X from IRS website and mail it in with your 8606, which you can also get in fillable PDF.
Note: since you are not changing any dollar amounts on your amended tax return, you can leave all the 1040-X  lines 1-23 EMPTY.

In Part III, you can explain your recharacterization. Include dates and amounts.

@gmcadams 

[dmertz · Accepted solution]

"The problem is, my broker did not issue me a 1099-R for 2021. "

That's not a problem.  You made no distributions in 2021.  Both of the Roth conversions performed in 2022 are reportable on your 2022 tax return, not on your 2021 tax return, by entering into TurboTax the $9,600 2022 Form 1099-R and indicating that the entire $9,600 was converted to Roth.  Your 2021 form 8606 should have only reported on Part I the nondeductible traditional IRA contribution that resulted from the recharacterization.  Your 2022 Form 8606 will show on line 1 the $6,000 contribution for 2022 and on line 2 the $4,200 (not $3,600 that I originally typed) carried forward from line 14 of the 2021 Form 8606.

There is no need to enter the code-R From 1099-R.  That should have been reflected in the recharacterization explanation required with your 2021 tax return.

[gmcadams]

Should I only enter the non-deductible Traditional IRA contribution of $4,200 and amend $0 for the Roth IRA for 2021 @fanfare ?

I assume I can do this all through TurboTax? Or should I hire a CPA to do this for me so I don't mess this up any more than I already have

[gmcadams]

@dmertz Should the 2021 Form 8606 (and line 2 for 2022 Form 8606) show the full original amount that was original contributed to the Roth IRA ($4,200) or the amount that it was worth at the time of recharacterization ($3,600)?

[fanfare]

your Roth IRA for 2021 is not on your tax return unless you filed Form 8880 for a credit.

In that case it doesn't matter whether your contribution is Traditional or Roth. No change is necessary.

@gmcadams 

[gmcadams]

@fanfare ahh you are correct, sorry, I meant that TurboTax had that amount listed as my Roth IRA contributions for 2021, but it looks like that isn't on my actual tax return anywhere

[dmertz]

My mistake.  You are correct that the 2021 Form 8606 should show $4,200, not $3,600.

[gmcadams]

@fanfare @dmertz I was playing around with TurboTax on the amendment - does this look correct?

Kind of annoying that it won't let me edit the form directly.  Note that this is the first year I could not directly contribute to a Roth IRA due to income limits.  So I don't have a Form 8606 for 2020, and I created this Traditional IRA in 2022 to backdoor the Roth IRA instead going forward.

[dmertz]

Yes, that's a correctly prepared 2021 Form 8606.

[fanfare]

@gmcadams 

Why did you enter $4,145, and not $4,200 which is the amount recharacterized.?

[gmcadams]

@fanfare that was the exact amount, was just rounding before

[gmcadams]

@fanfare @dmertz I just e-filed my amended 2021 return.  Really appreciate the help.  Just a couple more questions that came up:

TurboTax mentioned that I need to physically mail my state (Maryland) amended returns.  However, those didn't seem to change, other than updating my address.  Do I really need to mail the state amended returns?

It also mentioned having to mail the "Form 1040-V Payment Voucher", but I don't owe any extra taxes for 2021, so do I really need to mail that, too?

[dmertz]

I assume that the amendment to your Form 8606 did not change your AGI, so there is nothing to amend on your Maryland tax return.

With no change in your federal tax liability there is no balance due with the amendment .  With no money being sent there is no need for Form 1040-V.