23/24 Excess Roth contribution removed, and then converted back to ROTH...8606 problems

Forum|Forum|1 year ago
March 26, 2025
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Hello all and thanks in advance for the help. This situation seems odd but I can make it work on the paper 8606 form but not turbo tax.

-Contributed 6500 to Roth IRA early 2023(for 2023)

-Contributed 7000 to Roth IRA early 2024(for 2024)

-When filing 2023 taxes in March '24 discovered I earned too much for Roth contribution and requested a recharacterization of both deposits into traditional IRA.

-Received Distributions of 7291 and 7387 into traditional IRA May/June 2024 (total 14,678)

-then requested Roth conversion of all 14678. completed nov '24 (it earned some $)

-now I have 3 1099 R's.

1)7291 - 0 taxable amt, code R

2)7387 - 0 taxable amt, code N

3)14,867 - taxable amt unknown, total distribution.

-Turbo tax keeps calculating my taxable amt in 1040 line 4b as 7,867.

My understanding is that my 2023 basis for nondeductible IRA should be 6500, and 2024 should be 7000. leaving a taxable amt of 1367. How do I get this entered properly in TurboTax?

On a paper 8606 If I put line 1)7000 and 2)6500, and line 😎 14867 the taxable amt comes out to 0

I have not yet filed an amended '23 return with the distribution code R. Or a 8606. do I need to?

Thanks again.

TurboTax Basic Windows

dliberty12Author

8606 line #8, not sunglasses emoji face.

DanaB27

You should have reported the recharacterization of the 2023 contribution on your 2023 return and made it nondeductible. Then you should have a 2023 Form 8606 with a basis on line 14 which will be entered on your 2024 return.

If you didn't enter the recharacterization on your 2023 return then you will need to amend the 2023 return. Please see How do I amend my federal tax return for a prior year?

Note you do not need to enter the Form 1099-R with code R on your 2023 return since it doesn't make any changes on your 2023 return. You can only report the recharacterization with the steps below.

You will enter the recharacterization when you enter the contribution to the Roth IRA (on your 2023 and 2024 return):

Open your return
Click “Deductions &Credits” on the top
Click "I'll choose what to work on"
Scroll down to “Traditional and Roth IRA Contributions” and click “Start”
Select “Roth IRA”
Answer ‘Yes” on the “Roth IRA Contribution” screen
Answer “No” to “Is This a Repayment of a Retirement Distribution
Enter the Roth contribution amount
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.
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.
On the screen "Choose Not to Deduct IRA Contributions" answer "Yes". 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 report the conversion on your 2024 return:

Click "Federal Taxes" on the top and select "Wages & Income"
Click "I'll choose what to work on"
Scroll down and click "Start" next to "IRA, 401(k), Pension Plan (1099-R)"
Answer "Yes" to the question "Did You Have Any of These Types of Income?"
Click "I'll Type it Myself"
Choose "Form 1099-R, Withdrawal of Money from 401(k) Retirement Plans, Pensions, IRAs, etc."
Click "Continue" and enter the information from your 1099-R for the conversion
Answer questions until you get to “What Did You Do With The Money” and choose “I moved it to another retirement account”
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"
On the "Your 1099-R Entries" screen add Form 1099-R with code N
On the "Your 1099-R Entries" screen click "continue"
Answer "yes" to "Any nondeductible Contribution to your IRA?" if you had any nondeductible contributions in prior years.
Answer the questions about the basis from line 14 of your 2023 Form 8606 (should be $6,500) and the value of all traditional, SEP, and SIMPLE IRAs

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dliberty12Author

Sorry but this did not work. Does form 8606 on turbotax automatically populate the basis on line 2 from the previous years return? this form does not seem to be populating correctly.

-I have answered the question 'have you made and tracked non deductible contributions' as yes and entered my basis of 6500. Line 2 on my 8606 is still blank.

-lines 6-12 are all left blank. line 17 says enter the amount from line 11 which is lank but is populating as 7000.

-I answered that I have converted the entire 14'867 to ROTH and 8606 line 8 is still blank, but line 16 shows 14867.