RECHARACTERIZING ROTH IRA’S FOR MULTIPLE YEARS (2021 and 2022) AND IRS FORMS 5329 AND 8606

Submitted by Darel Crosby on Mon, 2023-03-13 19:30

The Husband and Wife, both made 2021 and 2022 ROTH IRA contributions in 2021 and 2022, but in 2022 when they were filing their 2021 tax return they realized they earned and would earn more than $220,000 in both years and were not eligible for ROTH IRA Contributions. We filed a ROTH IRA Recharacterization request with those accounts in 2022, but we are not sure how to file the 8606 and 5329 forms for them and in what order and deadline we need to meet.

Can you point me in the right direction to get the details I need to help them?



Submitted by Alan - IRA critic on Tue, 2023-03-14 00:30

  • If these Roth contributions were recharacterized, they each should have received a 1099R coded R for the 2021 recharacterized contribution and also a 1099R coded N for the 2022 recharacterized contribution. Form 5329 does not apply since there was no distribution, just direct transfers to a traditional IRA.
  • Form 8606 will be needed for each spouse for each year to report non deductible TIRA contributions, assuming that the IRA contributions were not deductible. The 2021 8606 for each can usually be filed by itself. SInce these ND contributions are cumulative, the 2021 forms should be completed first before the 2022 8606 forms are completed. Those can go with the 2022 return.
  • It’s too late to include an explanatory statement for the 2021 recharacterization, but the 2022 return should include an explanatory statement regarding the Roth contribution and it’s recharacterization.
  • In most cases, these recharacterizations would be closely followed by a Roth conversion assuming there is no non Roth TIRA balance (known as a back door Roth conversion). If this was not done, a conversion can be done now (reported as 2023 conversion) and only amounts in excess of the non deductible contribution amounts would be taxable.

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