Question about IRA and filing an amendment

[Sam78]

I filed my return in April as I was under the impression that I had all the paperwork I needed, wasn't planning on contributing any more to my Roth IRA, and knew the total amount I'd contributed.

On July 27th I got the final form 5498 from my broker and I realized that I'd made a mistake in how I filed. The overall amounts were the same but I'd accidentally lumped a Roth IRA conversion and the total Roth IRA contributions into one instead of classifying them separately which is what I was supposed to do.

I did the amendment in TurboTax and when I was done it said something to the effect of "We don't detect any differences between your original return and amended return Are you sure you need to amend?"

I tried calling the IRS to find out if I should file an amended return even though the dollar amounts are identical with the only difference being the way it was entered but I have not been able to get through even though. I've tried calling several times but always get the message that they are too busy and to try again later. So I thought I'd ask here and see what the recommendation is in this situation.

Thank you for the help and advice!

[fanfare]

roth contributions don't change your tax if you are eligible for that.

Roth conversions don't change your tax if you do a backdoor roth conversion.

Otherwise, a roth conversion will change your tax.

[Sam78]

Right.

There was no change to the refund and/or amount owed. I'm guessing it might be best to file the amendment just to be safe as you don't want to mess with the IRS.

But on the other hand, if it's really not necessary then I'd be happy to avoid standing in a long line for a very long time at the Post Office and paying for the shipping, etc.

[fanfare]

i don't know what "lump together" even means since they are different events.

your conversion is taxable so if you added a contribution into that amount you are paying more tax than you should be, or, your original return was not correct.

[Sam78]

Sorry, I'm not 100% sure how to explain it plus it was back in April so can't remember exactly what I did. 🙂

But from what I remember, I thought I put down both the Roth IRA conversion amount and the Roth IRA contributions as the total contribution for 2019. However, I just went over the return and compared the two line for line and I don't see any differences at all so maybe I did do it correctly after all.

And, seeing as the "amendment" didn't change the refund amount and it didn't cause anything to be owed I should be fine without filing an amendment even if there was a small mistake, right?

[VolvoGirl]

Did you enter the 1099R for the ROTH IRA conversion?  It should be on 1040 lines 4a and 4b.  Then you added it again with the amount contributed?  How much contribution did you enter?  Even though a Roth contribution is not deductible it would give you an excess contribution error if you entered more than the max allowed.  And there would be an excess penalty on your return.   

[VolvoGirl]

I'll page someone @dmertz  

[dmertz]

If you properly reported the Roth conversion by entering the Form 1099-R reporting the distribution from the traditional IRA but also included the conversion amount in the amount you entered as a regular Roth IRA contribution, as long as the total did not exceed the amount of the maximum regular Roth IRA contribution you could make and including this amount did not affect the amount that you might have been eligible to receive as a Retirement Savings Contributions credit, the extra amount entered as a regular Roth IRA contribution would not have affected your filed tax return and there would be no need to file the amended tax return.  Only if the additional amount inappropriately entered resulted in reporting an excess contribution or an increase in the tax credit would you need to amend.

Even if the additional amount inappropriately entered did not affect your filed tax return, you'll still want to use your amended tax file when transferring into 2020 TurboTax next year so that TurboTax tracks your correct Roth IRA contribution basis.

[Sam78]

I wasn't anywhere near the contribution limit.

I went back and looked over my original return a little closer and I see what I did now:

1: I entered the 1099-R under "IRA, 401(k), Pension Plans (1099-R)"

2: I entered the Roth IRA info under "Traditional and Roth IRA Conversions" but did not enter any Traditional IRA info as I figured this was taken care of in step 1.

3: I entered the Roth Contributions as the total of the Traditional IRA converted amount and the Roth IRA contributed amount.

If I leave everything as is but correct the Roth IRA amount to the actual contribution amount I end up owing the IRS $19.

Does that sound about right -- only needing to fix up the Roth contribution amount?

[dmertz]

Since you failed to report the traditional IRA contribution, you should file the amended tax return with the correction to show this amount as a traditional IRA contribution instead of as Roth IRA contribution and pay any additional taxes owed.

[Sam78]

So, when I enter the Traditional IRA info it then gives me a credit but I don't see how that can be possible when I did a conversion, that should cancel out the tax credit, right?

[Sam78]

So I amended my return, here's what I did. Would you be able to tell me if it looks like I did it right? It seems odd that I get an additional refund amount...

1. Told TurboTax I wanted to amend the return, removed the 1099-R, removed all info under "Traditional and Roth IRA Conversions" and "Retirement Savings Contribution Credit"
2. "Federal Refund" is now "$0"
3. Added 1099-R: $202 -- said that no extra tax was due on the money taken out based on info in box 7
4. Entered IRA info: Traditional: $196, Roth: $1,067, Wife's Roth: $500
5. Credit for Retirement Savings Contribution: Did not touch anything here -- says I have a credit of $176 which is the same as before amending

"Federal Refund" now shows "$56"

[dmertz]

Presumably the Form 1099-R that you added in step 3 was the same as the Form 1099-R that you removed in step 1, with the same answers to TurboTax's follow-up questions to entering that Form 1099-R, so the only relevant changes were the addition of the traditional IRA contribution and the correction of the Roth IRA contribution.

The resulting $56 refund from the amendment sounds a higher that expected, but possibly correct.  Reporting the traditional IRA contribution should have reduced your AGI by $196, reducing income tax by $24 for income in the 12% tax bracket.  Perhaps the reduction in AGI also moved $196 of qualified dividends or long-term capital gains from being taxed at 15% to being taxed at 0% instead.  That would probably entirely explain the refund amount.

[Sam78]

Yes, it was the same 1099-R. I simply wanted to remove anything to do with the IRAs and start again.

Is it normal to get the tax credit for Traditional IRAs even when doing a conversion? Seems like someone could get quite the tax break if they converted a maxed out traditional to Roth.

If actually meant to recharacterize and not convert but I think my brokerage misunderstood me.

This is all still new to me but I'm learning. Thanks for all the help!

[dmertz]

The credit is based on the original contributions, including the $196 contribution.  The subsequent Roth conversion is irrelevant with regard to the credit.

Since there was a gain in value, recharacterization would generally have been the appropriate transaction to perform, but with only $6 of gain, due to the stepwise nature of the tax tables there is only a small chance that there would be any difference in the overall tax liability either way.  Even if there was a difference, the difference would be slight.