Roth IRA Recharacterization
Client recharacterizing a portion of his 2023 Roth IRA contribution. The excess amount is $3,033 with earnings of $814.81. The recharacterization is being process today. What tax information does he need to make his CPA aware of for 2023 taxes?
I know a 1099R will be processed to report the distribution but don’t recall if its for 2024 tax reporting or 2023?
I was told he tells CPA he made a Roth IRA contribution for $3,467, a Trad non deduct IRA for 2023 of $3,033 (his recharacterization amount). Earnings are irrelevant to report since he recharacterized before deadline and didn’t process an excess withdrawal. Seems logical but don’t want the client to receive tax forms in mail in a few weeks with additional reporting requirements.
Permalink Submitted by David Mertz on Fri, 2024-02-09 22:30
The CPA needs to know the information that you have provided here, along with the amount originally contributed to the Roth IRA. The CPA should then prepare the 2023 tax return showing a $3,033 nondeductible traditional IRA contribution and should prepare an explanation statement indicating that $3,033 was recharacterized resulting in a transfer of $,847.81 to the traditional IRA after adjusting for the $814.81 of attributable investment gain. The recharacterization will be reported by the IRA custodian on a code-N 2024 Form 1099-R that the client can ignore when received next year. The explanation statement takes the place of this Form 1099-R on the 2023 tax return.