Meant to transfer $ to Roth IRA but chose IRA, now Turbo tax asked me to amend 2020 tax return

[Hawken1996]

I usually make contribution to my Roth at the time I filed the tax, this way I know for sure if I can and how much I can contribute.

In April 2021, I intended to make contribution to Roth, but by mistake, I moved the Money from my cash stock account to IRA account. Right after, I called the bank about this mistake, and instead moving the money back, they moved the money from IRA to Roth IRA.

One year later when I am preparing the 2021 tax return, I noticed that I have a 1099-R (year 2021) for this transaction.... it is re-characterization (box 7 with letter R and IRA/SEP/SIMPLE checked). 

Even though the $ amount are all correct for both IRA (net 0) and Roth-IRA (with incoming $). But the process wasn't quite right.. talked to Bank, after lengthy wait, I was told there is nothing they can do or change. 

When I put in the info to the SW, it prompted me that I need to amend 2020 tax return for this. 

So what should I do? I know I have two choices

1. Do nothing as all the $ amount is correct.

2. Leave 1099-R in 2021 tax return as it is there now, and amend 2020 tax return. I am not sure what I have to do in this one? During this year tax preparation, I noticed an error on 1099-DIV in 2020 tax that is about $200 mistake I can get back (double entries when importing from the broker site, it happened last year as well, but this time but I noticed). I probably won't amend just because of the $200 mistake as I filed in paper, in Feb 2022, I learned IRS hasn't reviewed my 2020 tax yet.  So amending 2020 tax return to me is a mess as I am not sure how I should do it.

Please help...  and much appreciate.

Hawken1996

[DanaB27]

To report a recharacterization on your 2020 tax return you will follow the steps below. TurboTax will create an Explanation Statement to report the recharacterization to the IRS.

You will enter the recharacterization when you enter the contribution to the traditional IRA: 

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 “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution
6. Enter the traditional IRA contribution amount 
7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount (no earnings or losses)
8. 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.

The 2021 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2020 and this belongs on the 2020 return. But a Form 1099-R with code R will do nothing to your return. You can only report it as mentioned above. Therefore, you can ignore the Form 1099-R with code R.

Please see How do I amend my 2020 return?

[Edited 4/10/2022 | 8:25am PST]

@Hawken1996 

[dmertz]

The bank recharacterized your 2020 traditional IRA contribution to be a 2020 Roth IRA contribution instead, resulting in the funds being transferred from the traditional IRA to the Roth IRA.  2021 TurboTax is simply reminding you that your 2020 tax return should reflect a Roth IRA contribution, not a traditional IRA contribution.  In 2020 TurboTax you would have entered the traditional IRA contribution, then indicated that you had the contribution recharacterized.  This would have either removed the deduction for a traditional IRA contribution or removed the reporting on Form 8606 of a nondeductible traditional IRA contribution, and would have prompted you to provide an explanation statement describing the recharacterization.  If your 2020 tax return already reflects a Roth IRA contribution, there is no need to amend it.

[Hawken1996]

Thanks to Dana and Dmertz for your response/clarification.

In 2020 tax return,

1. I indicated that I made contribution to Roth only (At that time, I thought my Bank corrected the whole thing in a way that my mistake was reversed and never happened process wise, which is incorrect as later found out). 

2. I did not mention I ever made contribution to IRA and then did a follow up re-characterization to Roth immediately afterwards.

So in such case, do I still need to make 2020 amendment? ?

If the answer is yes, the procedure from Dana should be helpful and I tested it through my 2020 TurboTax program, there is no change for the amount of dollar I own, an indicator likely I got it done right... but I am not sure how to generate amendment file only? The program think I am going to file again.

The link below is not as helpful. I am using PC software (Premier version) for both 2020 and 2021 and I filed in paper for 2020.

https://ttlc.intuit.com/community/amending/help/how-do-i-amend-my-return/00/27439

Thanks again for your quick response.

Hawken.

[dmertz · Accepted solution]

There is no point in amending the 2020 tax return just to provide the explanation of the recharacterization.  Just be prepared to provide explanation if the IRS ever asks for it.