Roth to traditional recharacterization with loss and conversion to Roth IRA

[dolphine1234]

(I read a few related posts on this community but the scenarios don't exactly match mine).

Details:

(1) Made Roth contribution of $6000  for 2022 in 2022

(2) In Jan 2023, I realized that I couldn't contribute to Roth contribution due to the income limit. In Jan 2023, I recharacterized the contribution including the loss to traditional IRA. The total amount $4800. (loss of $1200). The recharacterization was reported on 8606 for tax year 2022.  The $4800 was converted to Roth IRA right away so I have 0 balance in traditional IRA

(3) In Feb 2023, I contributed $6500 for tax year 2023 to traditional IRA and converted to IRA right away.

(4) In Feb 2024, I received two 1099-R. 

(a) Traditional IRA: $11300 ($4800 TY2022 + $6500 TY2023)  with Distribution code 2

(b) Roth IRA $4800 with Distribution code R

Question: I'm in the process to enter $6500 non deductible IRA contribution for TY 2023. I have zero balance in my traditional IRA on Dec 31, 2022. But I put 0 instead of $6000 (see screen capture), the $6000 contributed in 2022 becomes taxable. It is not right because the $6000 is not-deductible IRA for year 2022. What went wrong? Any recommendation on how file properly on TT.

[DanaB27]

Please be aware that this question is asking about the basis (nondeductible contribution) in your traditional IRA and since you recharacterized your $6,000 Roth IRA contribution for 2022 as a nondeductible traditional IRA contribution you are deemed to have a $6,000 basis in your traditional IRA at the end of 2022. Your 2022 Form 8606 line 14 should show the $6,000 basis.

To enter the nondeductible 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 amount you contributed of $6,500 for 2023
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” since you had a nondeductible contribution before this tax year.
9. Enter your basis in the Traditional IRA from your 2022 Form 8606 line 14 ($6,000 from your recharacterization/ nondeductible traditional IRA contribution)
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).

To enter the Form 1099-R conversion: 

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 2022 Form 8606 ($6,000) and the value of all traditional, SEP, and SIMPLE IRAs