did I make nondeductible contribution in 2020?

[dsyhome0510]

I did a contribution in 2021 but before 2020 tax due day. Should it be counted as 2020 contribution, and treated as 2020 basis?

but my 1099 R add this 2020 contribution to later 2021 contribution, TT reported excess 2021 contribution…

Was 1099 R from my bank wrong?

[fanfare]

Your bank sets the year to which ever year you told them you wanted it applied to.

If you did not say, it was the year you sent in the money.

If you want it non-deductible that is your choice but you have to tell the IRS.

You don't get a 1099-R for any contribution so don't enter any 1099-R amount as a contribution.

[fanfare]

Why are you posting this question again after getting the answer previously. ?

[dsyhome0510]

Fanfare:

thank you for your reply.  sorry for repeatedly asking seemingly same questions.

to understand your answer correctly:

1) my fault for not telling bank the1st contribution as 2020 nondeductible

2) telling IRS 2020 nondeductible contribution by submitting 8606 for 2020? can i do it now?

3) the last sentence: did you mean i didn't get an 2020 1099R for 2020 so i don't enter 2021 1099R as contribution?

i only have 2021 1099R, can i enter half of the double count into Turbo Tax 2021 interview, and rest half report to IRS with mail in  2020 8606 form?

your help is much appreciated 

[DanaB27 · Accepted solution]

No, you will enter the 2021 Form 1099-R as shown on your 2021 tax return. Did you move the funds to a Roth IRA (conversion)? In regards to the contribution, you can check on Form 5498 or your end-of-the-year statements should say how much you contributed for 2020 and for 2021.

If you made a nondeductible contribution for 2020 then you will have to enter the contribution on your 2020 tax return and make it nondeductible. Then TurboTax will create Form 8606 to report the nondeductible contribution, you will have a basis  (nondeductible contribution) on line 14 of Form 8606 to carry to 2021.

If you made a nondeductible contribution for 2020 then please see How do I amend my 2020 return? and follow these steps to enter the contribution to your traditional IRA on your 2020 tax return:

1. Open your return
2. Click “Deductions &Credits” on the top
3. Click "I'll choose what to work on"
4. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
5. Select “traditional IRA”
6. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
7. Enter the amount you contributed
8. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
9. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
10. If you had a basis in the Traditional IRA before then enter the amount.
11. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (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).

On your 2021 tax return to enter the  Form1099-R/conversion:

1. Click "Federal Taxes" on the top and select "Wages & Income"
2. Click "I'll choose what to work on"
3. Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)" 
4. Answer "Yes" to the question "Did You Have Any of These Types of Income?"
5. Click "I'll Type it Myself"
6. Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
7. Click "Continue" and enter the information from your 1099-R
8. Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account” 
9. Then choose “I did a combination of rolling over, converting, or cashing out money.” and enter the amount next to "Amount converted to a Roth IRA account"
10. On the "Your 1099-R Entries" screen click "continue"
11. Answer "yes" to "Any nondeductible Contribution to your IRA?"
12. Answer the questions about the basis from line 14 of your 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

If you also made a traditional IRA contribution for 2021 then follow these steps to enter the nondeductible contribution on your 2021 tax return:

1. Click “Deductions &Credits” on the top
2. Click "I'll choose what to work on"
3. Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had nondeductible contributions before this tax year
9. If you had a basis in the Traditional IRA before then enter the amount.
10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (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).

@dsyhome0510

[fanfare]

"1) my fault for not telling bank the1st contribution as 2020 nondeductible"

The bank does not know or care whether you chose to make it non-deductible.

If TurboTax will let you put the non-deductible contribution in now, IRS may let it go.

Strictly speaking , if you failed to file a prior form 8606, you have to do it.

[dsyhome0510]

DanaB27:

thank you for your reply.

per your instruction, i downloaded and entered form 8606/2020 and mailed to IRS.

here is how i did it:

for 1st $7000 nondeductible contribution to TIRA (2020), and carried over to 2021 as basis at RIAR conversion

8606/2020 shows

line1: $7000

line2: 0 (did nondeductible contribution first time in 2021 for 2020, so no basis before 2020

line3: $7000

line14: $7000

line18: 0

for 2nd $7000 nondeductible contribution to TIRA (2021)

two RIRA conversions of total $14000 in calendar year 2021

i could not follow your steps to amend 2020 tax return because my TT is Mac version and cannot open 2020 program. but 8606/2020 line18 showed "0" so there should be no tax number changes on 1040/2020, right ?

the steps for "deductions" and "1099R  inputs" in your answers are not all same with operations on my computer,  but follow my TT steps and using 2020 basis i could go through without "excess contribution" warning. THANK YOU!

i have another issue at Deductions and Credit section:

i was asked “how much your contribution to TIRA FOR 2021 switched or recharacterized to RIRA,  EXCLUDING conversion, and rollover”.  i am confused with the phrases here.

my backdoor RIRA transactions in 2021 calendar year, using 2020 and 2021 nondeductible TIRA contributions. Are these conversion or “switch”?  how should I answer the question? 

another doubt is, the above question only ask for 2021 TIRA contribution, but I had another (2020) contribution also “switched” to RIRA, where does TT handle this part?

this is a lengthy and messy message, appreciate your patience to read and answer it. 

[DanaB27]

It depends, did you enter the traditional IRA contribution before as a deductible contribution (Line 20 of Schedule 1)? If yes, then your Form 1040 and your tax might change. If you hadn't reported the contribution at all then there won't be any changes to Form 1040 and your tax.  The entries on Form 8606 seem accurate.

You made a conversion and not a switch (recharacterization) therefore you will not enter anything under "How much your contribution to TIRA FOR 2021 switched or recharacterized to RIRA".

To clarify about the 2020 "Switch", did you request a recharacterization with your institute (you would have gotten a 2020 Form 1099-R with code N in box 7 or a 2021 Form 1099-R with code R in box 7)? 

If it was a conversion instead of a recharacterization when did the conversion happen? In 2020 or in 2021?

@dsyhome0510

[dsyhome0510]

DanaB27:

Thanks for reply. To your questions:

1) On my 1040/2020 IRA contribution: I did not make traditional deductible IRA for myself, but for my wife. So line 20 (19 for 2020) in Schedule1 shows $7k for her tIRA.

2) On recharacterization: I did not make recharacterization through my institute, I transfered tIRA account money to rIRA. Box 7 code is 7.

3) The conversion happened twice, both in 2021. On 05/17 first conversion from 2020 nondeductible tIRA contribution made 05/10, on 06/24 from 2021 nondeductible tIRA contribution made 06/17

[DanaB27 · Accepted solution]

To verify, you only made a nondeductible traditional IRA contribution and you converted your traditional IRA to Roth in 2021. Your wife made a deductible traditional IRA contribution and did not convert anything.

If this is correct then your tax and Form 1040 in 2020 would not change and you will only have to add Form 8606.

You will enter the Form 1099-R for the conversions on your 2021 tax return as mentioned above. 

You will not enter anything when TurboTax asks if you changed your mind/ switched funds during the contribution interview. Only enter the contribution to the traditional IRA with the steps above and make it nondeductible (if it is made nondeductible automatically because of your income and retirement plan at work).

@dsyhome0510