Quick question: if recharacterized a Roth contribution, do you still have to report the Roth 1099-R in Turbotax?

[DanaB27]

No, this statement is referring to the entry on Form 1040 line 4. Basically, if you recharacterized a contribution for 2020 in 2020 you will get Form 1099-R with code N which is entered on your 2020 tax return. 

If you recharacterized a contribution for 2020 in 2021 you will get Form 1099-R with code R which you don't enter on your 2020 tax return. You will only make the entry in the contribution section and fill out the explanation statement stating that the original $xxx.xx plus $xxx.xx earnings (or loss) were recharacterized.

Line 4 of Form 8606 will have contributions (no earnings) made for 2020 from January 1, 2021, through April 15, 2021. This will only be filled out if you made a conversion (or took a distribution from your traditional IRA) in 2020 otherwise it will be blank. You will enter it during your contribution interview when TurboTax asks how much you contributed to the traditional IRA.

1. Click on "Search" on the top right and type “IRA contributions” 
2. Click on “Jump to IRA contributions"
3. Select “traditional IRA”

No, line 4 on Form 8606 won't be $2,317 because you made the Roth contributions that were recharacterized in 2021 in 2020. Therefore, it is deemed to have been made in 2020. It should be $1,000. 

Please be aware, that earnings that were earned in the Roth IRA before recharacterizing are not included in the basis of the traditional IRA. They are deemed to be earned in the traditional IRA and therefore will be taxable when you make a conversion. Therefore, your total basis should be $2,000 for 2020.

@dhuynh44 

[dhuynh44]

Hi @DanaB27, you were a big help to me last year.   I amended my 2020 and turned in my 2021 returns but upon trying my 2022 return the numbers didn’t seem to add up so I’m taking a look back at 2020 to start.

“Please be aware, that earnings that were earned in the Roth IRA before recharacterizing are not included in the basis of the traditional IRA. They are deemed to be earned in the traditional IRA and therefore will be taxable when you make a conversion. Therefore, your total basis should be $2,000 for 2020”.

 To recap:

• $1237 recharacterized in 2020 ($1000 contributed)
• $1000 directly to traditional in 2020
• $1000 directly to traditional in 2021 for 2020
• $1317 recharacterized in 2021 for 2020 ($1000 contributed)
• 1099-R code = N $1237
• 1099-R $2203

In a post earlier in this thread I mentioned: if I received a 1099-R box 7 = N for 2020 for $1237.  I contributed $1000 to Roth, then when I recharacterized this amount became $1237

• Under "Deductions and Credits" when it says to "Enter Your Roth IRA contributions" ----- Enter total Roth IRA contributions for 2020 even if you transferred, or "recharacterized" some or all of it to a traditional IRA" I would input $1000 correct?
• On the next screen it asks for the AMOUNT  TRANSFERRED should be $1237 according to @MinhT1 due to gains on my 1099-R.  Is this correct?
• If I do this my Line 1 on form 8606 becomes $1237

Do I do add this same thing for as stated above for my recharacterization of $1317 in 2021?

• How much Roth did you contribute: $2000
• How much if this amount did you transfer? $2554 ($1237 + $1317)

This makes line 1 on 8606 $4554.  Should this be $4000 (contributed) or $4554 (contributed + earnings)?  After doing to calculations on the worksheet should the the $554 (gains from recharacterizaions) be included in my line 14 basis ($2000 or $2554?). 

thank you!

[DanaB27]

Question 1. Yes, you will enter the $1,000 as contributed to the Roth IRA.

The recharacterization screen is a bit tricky. Yes, your institute had to transfer the contribution and earnings but TurboTax asks how much of your $1,000 contribution was recharacterized and here you would enter only the $1,000 contributed (disregard any earnings and losses).

Question 2. Yes, since you actually contributed a total of $2,000 to the Roth for 2020 and recharacterized $2,000 you will enter your $2,000 contribution and $2,000 as recharacterized on the “Tell us how much your transferred” screen on your 2020 tax return.

Question 3. The total on line 1 of Form 8606 will be $4,000 the amount you contributed and wasn't deductible. 

No, the gains/earnings will not be included on your basis on line 14 Form 8606.

@dhuynh44 

[dhuynh44]

@DanaB27@MinhT1 

Thank you both for your help.   Using the $1237 example for roth recharacterization as an example:

When I click "LEARN MORE" it says:

An annual contribution to a Roth IRA can be recharacterized as a traditional IRA contribution. The recharacterization must be for the same year the contribution was made. Also included in the transaction is any earnings attributable to the contribution while it was in the Roth IRA. The total of your contribution and the earnings attributable to your contribution is referred to as the amount "transferred."

At the part "Tell Us How Much of the Roth Contribution you transferred"

@MinhT1says that it should be $1237

@DanaB27says that it should be $1000

Sorry I was hoping to receive some more clarification on this part since I am receiving 2 different answers.  Which one should I use?  Thank you all

[GeorgeM777]

Following up on the comments from @MinhT1 and @DanaB27, it should be the excess contribution amount, not including the earnings. TurboTax guidance provides the following regarding the screen you are seeing:

1. On the next screen, Tell Us How Much You Transferred, enter the excess contribution amount (don't include earnings or losses)
2. On the screen, Roth IRA Explanation Statement, enter the original amount plus the amount of earnings or loss that were re-characterized.

Below is a link to the TurboTax article that explains a Roth re-characterization to a Traditional IRA.

How do I re-characterize a Roth IRA contribution as a traditional IRA contribution in TurboTax?

@dhuynh44 

[dhuynh44]

Thank you for the clarification! @GeorgeM777 @DanaB27 @MinhT1 

[dhuynh44]

@DanaB27 

Hi if possible are you able to verify if this 8606 form looks correct please?

To recap:

• $1237 recharacterized in 2020 ($1000 contributed in 2020)
• $1000 directly to traditional in 2020
• $1000 directly to traditional in 2021 for 2020
• $1317 recharacterized in 2021 for 2020 ($1000 contributed)
• 1099-R code = N ($1237) for 2020
• 1099-R code = R ($1317) received in 2021
• 1099-R traditional ($2203) for 2020
• No prior traditional IRA basis

Line 1 = $4000

Line 2 = $0

Line 3 = $4000

Line 4 = $1000

Line 5 = $3000

Line 13 = $2203

Line 14 = $1797

Line 16 = $2203

Line 17 = $2203

Line 18 = $0

Can you please explain why line 14 is $1797.  I see it's $2000 - $203 but just curious what this means going forward.  Am I supposed to get taxed on $203?  Because line 18 = $0.  Thank you!!!

[DanaB27]

Yes, your Form 8606 looks correct.

Line 14 is your unused basis ($4,000 - $2,203 = $1,797) and this will carry over to your 2021 tax return. You can enter this basis during the interview on your 2021 tax return (either in steps 9 and 10 when you enter your contributions for 2021 or in steps 11 and 12 when you enter your conversion).

To enter the nondeductible contribution to the traditional IRA:

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. Enter your basis in the Traditional IRA from your 2020 Form 8606 line 14 
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).

To enter the 1099-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?" if you had any nondeductible contributions in prior years.
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

@dhuynh44 

[dhuynh44]

@DanaB27 

thank you.  This will be the second time amending 2020.  I ended up paying more taxes in 2020 after amending it incorrectly.  If it turns out I would be owed a refund doing it a second time, is the IRS supposed to send me a refund?  (However long that takes).  Thank you

[DanaB27]

Yes, the IRS will accept an amended return up to three years after the date you filed the original return or within two years after you paid the tax due on the return, whichever is later. Therefore, if you now have a refund due the IRS will send you a refund.

@dhuynh44 

[dhuynh44]

Hi @DanaB27 

I really appreciate all of your help!  If possible are you able to just let me know if my wife's 2020 8606 is correct?  I believe we amended it incorrectly and it is affecting our 2022 taxes. 

To recap:

• $1138.95 recharacterized in 2020 ($1000 contributed in 2020 for Roth)
• $1000 contributed directly to Traditional in 2020
• $3182.64 recharacterized in 2021 for year 2020 ($2500 contributed in 2020)
• 1099-R code N = $1138.95
• 1099-R code R = $3182.64
• 1099-R for traditional = $2108.95
• No prior basis
• $0 at end of year traditional

Line 1 = $4500

Line 2 = $0

Line 3 = $4500

Line 4 = $0

Line 5 = $4500

Line 13 = $2059

Line 14 = $2441

Line 16 = $2108

Line 17 = $2059

Line 18 = $49

Thank you so much!

[DanaB27]

Yes, your wife's Form 8606 looks correct.

The basis on line 14 will be carried over to your 2021 tax return (you can enter it during the interview).

@dhuynh44 

[dhuynh44]

Hi @DanaB27 

Thank you for your help, I think we have successfully completed 2020 amendment.  Now on to 2021.  If possible are you able to please review our 2021 8606 forms?  Thank you!

To recap for me:

• 2020 line 14 basis: $1797
• $3080 contributed to traditional in 2021
• $2920 contributed to traditional in 2022 for 2021
• $500 leftover in traditional account year end 2021
• 1099-R for 2021 ($4902)

Line 1 = $6000

Line 2 = $1797

Line 3 = $7797

Line 4 = $2920

Line 5 = $4877

Line 13 = $4426

Line 14 = $3371

Line 16 = $4902

Line 17 = $4426

Line 18 = $476

To recap for my wife:

• 2020 Line 14 basis: $2441
• $4580 contributed to traditional in 2021
• Rolled over money from 401k to traditional ending balance in 2021 as $18,246 which $500 was nondeductible (did not know about pro-rate rule unfortunately)
• 1099-R for 2021 ($7265)

Line 1 = $4580

Line 2 = $2441

Line 3 = $7021

Line 4 = 0

Line 5 = $7021

Line 13 = $1999

Line 14 = $5022

Line 16 = $7265

Line 17 = $1999

Line 18 = $5266

Thank you!!

[DanaB27]

Yes, your Form 8606 is correct.

About your wife, you stated in the rollover from your wife's 401k to a traditional IRA that she had a basis of $500 in this 401(k)?  If yes, then this $500 basis has to be added to the line 2 basis on your wife's Form 8606. Therefore, her line 2 basis would be $2,941 (= $500 + $2,441).

"You rolled over any nontaxable portion of your qualified retirement plan to a traditional, SEP, or SIMPLE IRA that wasn’t previously reported on Form 8606, line 2. Include the nontaxable portion on line 2." (Form 8606 instructions)

@dhuynh44 

[dhuynh44]

@DanaB27  Thanks for the quick response.  

The $500 was from 2021 nondeductible contribution to traditional.  On top of the $4580 contributed in 2021, we rolled over her 401k from her old employer which the $500 is included in the whole value of her $18246 in traditional if that makes any sense.  We forgot to convert this in 2021 and converted this $500 in 2022.  We converted $4050 of the $4580 in 2021.

Also, I noticed when I increased the amount of how much I contributed in 2022 for year 2021 (I did $1920 for last year's return when it should actually be $2920) it increased my taxes due.  Why is this the case?

EDIT:  I was looking at our 2020 form for IRA information worksheet and I do have a question please:

Specifically: "Under Wages and Income"

• "Tell us the value of your traditional IRA": this value should be the same as the value when it asks this same question under "Deductions and Credits" of my "value of your traditional IRA" and says to "Include any IRA contributions I made of will make in 2021 for 2020"?
• This value should be $1000 correct?  My 5498 says $0 for end of year, but I add my $1000 contribution from 2021 for 2020, and DO NOT add my $1000 recharacterization in 2021 for 2020. 
• I just realized under “Wages and Income" I had my end of year value as $0, while under "Deductions and Credits" I had my end of year value as $1000.
• "Outstanding recharacterizations": this should be $1000 b/c of the $1000 I recharacterized in 2021 for 2020

Because my 8606 then becomes:

Line 1= 4000

Line 2= 0

Line 3 = 4000

Line 4 = 1000

Line 5 = 3000

Line 13 = 2097

Line 14 = 1903

Line 16 = 2203

Line 17 = 2097

Line 18 = 106

Thank you!