Here's my situation: In 2018, I contributed the full $5500 to my Roth IRA and filed my 2018 tax returns on time (before April 15, 2018)A week ago, I realized that I was over the income limit for Roth IRA contributions. So after a little research, I learned that I have until Oct 15, 2019 to remove the excess contributions to avoid the 6% penalty. I recharacterized the excess (plus earnings) to a Traditional IRA.I believe I now need to file an amended 2018 tax return. Not sure exactly what I need to do and by when.FYI, I'm told the 1099-R for this recharacterization is not going to be produced until next year (2020) and I'm not sure if I need to fill out/amend other forms (e.g. 8606, 1040, etc.). I also have an employer sponsored 401K and over the income limit so this will be a non-deductible TIRA contribution. Any help is greatly appreciated!

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x46359

Question

When and how to amend tax return after recharacterizing excess contribution to Roth IRA

Forum|Forum|6 years ago
September 5, 2019
2 replies
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Here's my situation:

In 2018, I contributed the full $5500 to my Roth IRA and filed my 2018 tax returns on time (before April 15, 2018)
A week ago, I realized that I was over the income limit for Roth IRA contributions. So after a little research, I learned that I have until Oct 15, 2019 to remove the excess contributions to avoid the 6% penalty.
I recharacterized the excess (plus earnings) to a Traditional IRA.
I believe I now need to file an amended 2018 tax return. Not sure exactly what I need to do and by when.
FYI, I'm told the 1099-R for this recharacterization is not going to be produced until next year (2020) and I'm not sure if I need to fill out/amend other forms (e.g. 8606, 1040, etc.). I also have an employer sponsored 401K and over the income limit so this will be a non-deductible TIRA contribution.

Any help is greatly appreciated!

TurboTax Online

Critter

Employee

Nothing is done on the 2018 return ... the 2019 1099-R will be reported on the 2019 return. And FYI ... if you had entered the ROTH contribution in the program to start with it would have told you about the over contribution earlier so you could take care of it before 4/15... also if your income is that high you really need to wait to file your return to see how much you can legally put in before you make the contribution since you have until 4/15 to do so ... this way you will never have this issue again.

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dmertz

Employee

Yes, your 2018 tax return now needs to include From 8606 to report the nondeductible traditional IRA contribution. If the original excess Roth IRA contribution was reported on 2018 Form 5329 and the penalty paid, Form 5329 will also need to be amended to explicitly show that there is now no excess contribution. [Critter's answer is wrong with respect to this.]

There is no need to wait to amend. In TurboTax you'll revisit the Traditional and Roth IRA contribution section, make sure that you have entered the Roth IRA contribution and, when TurboTax indicates that it's an excess contribution, indicate that you had the contribution ($5,500) recharacterized to a traditional IRA. TurboTax will prompt you to prepare an explanation statement that needs to be included with your amendment which should indicate the amount contributed to the Roth IRA ($5,500), the amount recharacterized ($5,500) and the earnings-adjusted amount transferred to the traditional IRA. TurboTax will prepare Form 8606 to show the nondeductible contribution.

Since your recharacterization was performed after April 15 after having timely filed your tax return you must indicate “Filed pursuant to section 301.9100-2” on your Form 1040X. You'll need to mail the Forms 1040X, 8606 and, if originally filed to show the excess Roth IRA contribution, the corrected From 5329. You'll need to prepare Form 5329 manually since TurboTax will simply remove the entries on Part IV, but you actually need to now indicate that $0 was excess to correct the originally filed Form 5329.

After amending, you can ignore the code R 2019 Form 1099-R that you'll receive next year since you will have already reported the recharacterization. If you enter it into 2019 TurboTax, TurboTax will ignore it other than to remind you that the recharacterization was reportable on your 2018 tax return. If you enter it into 2018 TurboTax, TurboTax will also ignore it.

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x46359Author

Thank you both for your quick and timely responses.

A few follow-up questions:

Given the Roth IRA contribution wasn't explicitly reported in my 2018 return, I don't see Form 5329 (or any penalty paid) as part of the package that was filed. Do I still need to prepare and file a revised Form 5329 with the amended return?
Any idea what steps (if any) need to be taken to amend my state return (California)?

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dmertz

Employee

Since no Form 5329 was filed with your originally filed tax return, no Form 5329 is needed with your amendment.

I'm not as familiar with California taxes, but I don't think that you need to amend anything with regard to your California tax return. Your federal AGI does not change as a result of the recharacterization, so I don't think that your California tax return would change. When you do the amendment in TurboTax, check to see that the resulting California tax return is unchanged from your filed tax return.