AGI too high for Roth IRA, recharacterized to Traditional ARI and back to Roth

In 2011 my wife and I contributed the max ($10,000) a Roth IRA.  We found out our AGI was too high and our investment adviser had us recharacterze it to a Traditional IRA and then put it back into the Roth and we did not have to pay taxes on the money.  At that time we had already made our contribution for 2012 and assuming our AGI would be too high again did the same thing.  TT is now treating the entire $20,000 we recharacterized in 2012 as Gross Distrubution and taxing us as such when we never took any of the money.  I entered everything manually into TT and then had everything downloaded directly from our broker and each way has the thing.  Am I doing something wrong, or have I been given bad investment advice?
    Cancel
    DISCLAIMER: I am not a CPA, and you should double check what I say here.

    You and your wife can recharacterize your total of $20,000 Roth IRA contributions up until October 15 of the following tax year. You don't say so, but I assume you met that requirement. That means you put it in a Traditional IRA, as you said you did. That cancels out the tax due on the $20,000/

    After recharacterizing, you can reconvert to a Roth IRA, but have to wait the longer of 30 days or until the next calendar year after the original Roth contribution. When you convert, that $20,000 now becomes taxable again.

    Hope this helps.

    Martin
      Cancel
      Contribute an answer

      People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

      1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
      2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
      3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
      4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
      5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.
      Cancel