contributed to roth in 2023, recharacterized with profits in 2024, backdoored back in 2024

Forum|Forum|1 year ago
January 30, 2025
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I'm completely baffled how to enter all this in turbo tax.

1. In 2023 I contributed $6500 to a Roth Ira -- and i made it nondeductible claiming the $6500 basis.

2. At the start of 2024 (long before April 15) I realized my income limits would not let me do the Roth, so I recharacterized the $6500 plus the $1500 growth ($8000 in total) to my traditional IRA.

(I got a 1099R with the roth account number for this $8000 with distribution code R)

3. Then one day later in 2024 I converted the $8000 back to Roth from the traditional

(I got a 1099R for the traditional account for the $8000 with distribution code 2). This is the backdoor thing.

From a big picture point of view, I figure I should pay tax on the growth (the $1500) in 2024
because had I simply put the $6500 in in 2023 and then converted $8000 out in 2024 that's what would happen.
However, I have no idea how to tell TurboTax all this happened, or what parts TurboTax needs to know about.
Any help is welcome.

DanaB27

On your 2023 return you should have reported the recharacterization form Roth IRA to traditional IRA:

Login to your TurboTax Account
Click on "Search" on the top right and type “IRA contributions”
Click on “Jump to IRA contributions"
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 of $6,500
Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $6,500 (no earnings or losses) on the next screen.
TurboTax will ask for an explanation statement where it should be stated that the original $6,500 plus $1,500 earnings were recharacterized.
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)

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.

You should have a 2023 Form 8606 with a $6,500 basis on line 14. And you will enter this basis on your 2024 return when you enter the Form 1099-R for the conversion:

Click on "Search" on the top right and type “1099-R”
Click on “Jump to 1099-R”
Click "Continue" and enter the information from your 1099-R
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”
On the "Review your 1099-R info" screen click "Continue"
Answer "Yes" to "Any nondeductible Contributions 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 and the value of all traditional, SEP, and SIMPLE IRAs

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taxcurious2Author

Thank you very much for the detail answer but I'm confused.

>> On your 2023 return you should have reported the recharacterization form Roth IRA to traditional IRA:

I only recharacterized in 2024 as I realized that I couldn't do the Roth IRA in 2023. Do I have to file an amended return for 2023 then?

ThomasM125

Yes. I assume the recharacterization of the $6,500 plus the $1,500 of earnings was to apply to 2023, since that is the year you had made an excess contribution to the Roth IRA. So you would need to amend the 2023 tax return to report that, unless you had reported that on that return when you filed it.

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