When you recharacterize a contribution to traditional IRA then the earnings are deemed to have been earned in the traditional IRA.
No, you cannot withdraw the earnings from the traditional IRA without a penalty if you are under 59 1/2.
You will enter the recharacterization when you enter the contribution to the Roth IRA on your 2024 return:
- 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 $7,000
- Answer “Yes” to the recharacterized question on the “Switch from a Roth To a Traditional IRA?” screen and enter the contribution amount of $7,000 (no earnings or losses) on the next screen.
- TurboTax will ask for an explanation statement where it should be stated that the original $7,000 plus $1,096 earnings were recharacterized.
- On the screen "Choose Not to Deduct IRA Contributions" answer "Yes" if you are thinking about doing a backdoor Roth. Otherwise select "No". 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.
You will get a 2025 Form 1099-R for the recharacterization with code R-Recharacterized IRA contribution made for 2024 and this belongs on the 2024 return. But a 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 when you get it in 2026. The box 1 on the 1099-R will report the total recharacterized amount (contribution plus earnings) but it does not separately report the earnings and box 2a must be zero.
