Recharacterization and Backdoor Roth IRA Questions

[lubinlaw]

My Situation:

When preparing my 2024 tax return, I contributed $7,000 to my Roth IRA on January 10, 2025. However, on February 12, 2025, I realized that my income exceeded the Roth IRA limit. I contacted my brokerage and completed a recharacterization from my Roth IRA to a Traditional IRA. The total amount recharacterized was $7,095 (original $7,000 + $95 earnings).

On February 14, 2025, I completed a Backdoor Roth IRA conversion by transferring the funds from my Traditional IRA back to my Roth IRA. The amount converted was $7,195 ($7,095 + $100 earnings while in the Traditional IRA for two days).

Since all these transactions after 12/21/2024, I did not receive any tax forms related to these transactions for my 2024 tax filing.

My Questions:

1. How do I properly report this on TurboTax for my 2024 tax return? If possible, I would appreciate step-by-step instructions.
2. When filling out the Traditional IRA and Roth IRA section on TurboTax, should I check both accounts, or just one, based on my situation?

Thank you very much for your help!

[DanaB27 · Accepted solution]

You will enter the recharacterization when you enter the contribution to the Roth IRA for 2024:

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 “Roth IRA”
5. Answer ‘Yes” on the “Roth IRA Contribution” screen
6. Answer “No” to “Is This a Repayment of a Retirement Distribution
7. Enter the Roth contribution amount 
8. Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount (no earnings or losses) on the next screen.
9. 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.
10. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" since you are doing a backdoor Roth 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.

You will get a 2025 Form 1099-R  for the recharacterization with code R-Recharacterized IRA contribution made for 2024 and this belongs on the 2024 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 when you get it in 2026. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.

TurboTax will create a 2024 Form 8606 with a basis in line 14 and this will be carried over to your 2025 return.

Next year on your 2025 return you will report the conversion (Form 1099-R with code 2):

1. Click on "Search" on the top right and type “1099-R”  
2. Click on “Jump to 1099-R”
3. Click "Continue" and enter the information from your 1099-R
4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA”
5. On the "Review your 1099-R info" screen click "Continue"
6. Answer "Yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
7. Answer the questions about the basis from line 14 of your 2024 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs

[lubinlaw]

Hi DanaB27,

Thank you very much for your answer! Appreciate it.

One last follow-up question about the explanation statement from your Answer in step 9. Should I only explain the Recharacterization? or do I also need to explain the Back Door Roth IRA? The following is my statement and not sure if that is ok, please advise, and thank you again for your time!

Statement: "I contributed $7,000 to my Roth IRA on January 10, 2025. However, on February 12, 2025, I realized that my income exceeded the Roth IRA limit. I contacted my brokerage and completed a recharacterization from my Roth IRA to a Traditional IRA. The total amount recharacterized was $7,095.75 (original $7,000 + $95.75 earnings). On February 14, 2025, I completed a Backdoor Roth IRA conversion by transferring the money from my Traditional IRA back to my Roth IRA. The amount converted was $7,183.37 ($7,095.75 + $87.62 earnings while in the Traditional IRA for two days)." 

[DanaB27]

You only explain the recharacterization in step 9. 

You can remove "On February 14, 2025, I completed a Backdoor Roth IRA conversion by transferring the money from my Traditional IRA back to my Roth IRA. The amount converted was $7,183.37 ($7,095.75 + $87.62 earnings while in the Traditional IRA for two days)"