Roth IRA Recharacterization. File Form 8606???

Submitted by Paula Calhoun on Mon, 2023-02-20 13:22

I posted a question earlier, and you were very helpful. Recap: In 2022, I contributed monthly to a Roth IRA. I also made a contribution in January 2023. In preparing my 2022 return, I discovered that my 2022 income was too high for any contributions, and it will probably be too high in 2023. Therefore, in February 2023, I recharacterized the entire 2022 contribution plus earnings (which had actually gone down in value) and the entire January contribution plus earnings (which had slightly increased in value) to a TIRA. By recharacterizing from a Roth IRA to a TIRA, haven’t I made nondeductible contributions to a TIRA that need to be reported on an 8606 with my 2022 return? The instructions for form 8606 (p.4 Recharacterizations, scenario #2 on the right side) say yes, but some posts say no. I’m confused whether to file form 8606 with my 2022 return, my 2023 return, or both.



Submitted by William Tuttle on Mon, 2023-02-20 15:08

  • A recharacterized Roth IRA contribution is filed as if an original traditional IRA contribution was made. If you do not claim a deduction, you should report the non-deductible traditional IRA contribution on Form 8606.
  • You file Form 8606 based on amounts for the tax year and not in the calendar year. If the 01/23 contribution was for the 2022 tax year, it should be included on the 2022 Form 8606.

Submitted by Alan - IRA critic on Mon, 2023-02-20 16:04

  • You will not receive a 1099R for recharacterization of your 2022 contribution until Jan, 2024. It will be coded R to reflect recharacterization of a 2022 contribution. Because of this, you should include an explanatory statement with your 2022 return about the recharacterization. But other than this statement and the 8606 to report a non deductible 2022 contribution, this is not reported on your 2022 return, or your 2023 return. 
  • If you also recharacterize your 2023 contribution in 2023, you will get an additional 1099R in Jan, 2024 coded N to denote recharacterization of your 2023 contribution in 2023. 
  • If you have no pre tax TIRA balance, you should convert these contributions back to Roth right after you recharacterize them. The conversion would be non taxable or possibly have a very small taxable portion. This process is referred to as a “back door Roth” contribution. The conversion is also reported on Form 8606 for the year of the conversion (2023).

Submitted by Paula Calhoun on Mon, 2023-02-20 16:17

Okay, I think I see why I am confused.  I left out important information.  I am covered by a 401(k) at work, so the 2022 contribution that I recharacterized from the Roth IRA to the TIRA will have to be nondeductible.  Therefore, I have to file form 8606 and a statement explaining the 2022 contribution and recharacterization with my 2022 return?  The 1/23 contribution was for 2023 so I don’t have to report that on the same 8606, correct?  I will report that on an 8606 with my 2023 return?

Submitted by Alan - IRA critic on Mon, 2023-02-20 17:02

Yes, you are correct. You can wait to recharacterize the 2023 contribution until you are reasonably sure you will be over the limit for 2023 income for your filing status.

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