☰
✕
Sign In

Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 2
posted Apr 9, 2022 3:11:48 PM

Two 1099-R for backdoor IRA MESS

Hello community,

 

I received 2 1099-R forms due to a recharacterization for back door roth conversion (contributed $6k directly to roth, grows to $7k, recharacterized to traditional, and converted back to roth ira to avoid income limits). I know I will owe income tax on the $1k in capital gains and will come about $250. 

 

I am really frustrated on how to input this information correctly into TurboTax. Once 1099 R are entered, this shoots tax due through the roof! Can you please state step by step procedure how to enter/report this using the numbers provided above ? I know in the end of the day, I should see tax from ira is $250 (~25% income tax) by I am not able to achieve that. 

 

Thanks! 

0 1 331
1 Replies
Expert Alumni
Apr 10, 2022 5:38:52 AM

If you made a contribution for 2021 and recharacterized it in 2021 then please follow the steps below to enter your recharacterization.

 

You will enter the recharacterization when you enter the contribution to the Roth 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 “Roth IRA”
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution
  6. Enter the Roth contribution amount of $6,000
  7. Answer “Yes” to the recharacterized question on the “Did You Change Your Mind?” screen and enter the contribution amount of $6,000 (no earnings or losses)
  8. 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.
  9. On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" and enter $6,000 (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)

 

 

Please be aware, if you recharacterized a contribution for 2020 then you will have to enter it on your 2020 tax return. Then you will have a basis on your 2020 Form 8606 line 14 to carry over to 2021 (enter during step 7 below).

 

To enter the 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 2020 Form 8606 and the value of all traditional, SEP, and SIMPLE IRAs on December 31, 2021 (from your 2021 year-end statement).

 

Please be aware, if your traditional, SEP, and SIMPLE IRAs were not empty ($0) on December 31, 2021 then some of the basis will be applied to the amount left in the account. Please see pro-rata rule for additional information.