Roth IRA recharacteriztion: do I need to file amended return?

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hudson4351
Posts: 307
Joined: Fri Aug 10, 2007 8:30 pm

Roth IRA recharacteriztion: do I need to file amended return?

Post by hudson4351 » Wed Feb 24, 2016 1:07 pm

On 11/19/2014, I contributed $5500 to my Vanguard Roth IRA for tax year 2014 that ended up being $3000 too high due to income limits.

On 4/13/2015 I had $3000 of my contribution recharacterized as a non-deductible contribution to an existing traditional/rollover IRA at Vanguard.

In my 2014 tax return, I included Form 8606 with $3000 entered on line 1. Line 15a of my form 1040 is blank, but the explanation for line 15a included with my tax return indicates:

- date of original contribution (11/19/2014)

- date of recharacterization (04/13/2015)

- the amount recharacterized ($3000)

- the amount transferred ($3000)

- Reason for the Recharacterization: income too high for 2014


Now I am doing my taxes for 2015 and after entering my form 1099-R, TurboTax says:

Code: Select all

It Looks Like You May Need to Amend Your 2014 Return

Here's why: Your 1099-R reports earnings on a contribution you made in 2014. This information needs to go on your 2014 return.  If you've already filed your 2014 return, then you'll need to amend it. Here's how.
My question: Do I really need to amend my 2014 return? It looks like the only discrepancy is in my included statement, where I indicated that $3000 was transferred, but it was actually $3136.78. Is there anything else that needs to be updated in my 2014 return?

I can kind of see why Turbotax is giving the warning: the amount transferred ($3136.78) does not match the contribution amount ($3000), however nowhere on form 1040 does it ask you for the actual amount transferred, except on the attached statement; form 1040 only asks you for the basis (i.e. original contribution amount). Given that, it seems the amount on form 1099-R will always differ from form 1040 if your investment appreciates in value before you make the recharacterization.

Alan S.
Posts: 8491
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth IRA recharacteriztion: do I need to file amended return?

Post by Alan S. » Wed Feb 24, 2016 1:36 pm

You must have made an incorrect entry to Ttax. The software response matches that of returned contribution, not a recharacterized contribution. What code is in Box 7 of the 1099R?

I assume you left 2,500 of the Roth contribution untouched in the Roth.

Topic Author
hudson4351
Posts: 307
Joined: Fri Aug 10, 2007 8:30 pm

Re: Roth IRA recharacteriztion: do I need to file amended return?

Post by hudson4351 » Thu Feb 25, 2016 9:00 am

Alan S. wrote:You must have made an incorrect entry to Ttax. The software response matches that of returned contribution, not a recharacterized contribution. What code is in Box 7 of the 1099R?

I assume you left 2,500 of the Roth contribution untouched in the Roth.
Box 7 is R. I did leave the other $2500 in the Roth.

Alan S.
Posts: 8491
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth IRA recharacteriztion: do I need to file amended return?

Post by Alan S. » Thu Feb 25, 2016 8:28 pm

The 1099R matches what you said you did, a recharacterization of a 2014 contribution.

This should not go on your 2015 return anywhere. Perhaps if you entered it with the code R, this is just a generic notice that changes might be needed to your 2014 return. However, the comment about earnings is strange since there was no distribution and therefore no taxes due.

You do not need to amend your 2014 return.

Topic Author
hudson4351
Posts: 307
Joined: Fri Aug 10, 2007 8:30 pm

Re: Roth IRA recharacteriztion: do I need to file amended return?

Post by hudson4351 » Sat Feb 27, 2016 12:35 pm

What about the fact that the "The Amount Transferred (Recharacterization plus earnings or losses):" on my Explanation Statement is incorrect? I entered $3000 by mistake; the actual amount transferred was $3136.78. That number only appears on the explanation statement; it doesn't appear to be used anywhere in the actual tax calculations. Do I need to amend a return just to correct an included statement?

Alan S.
Posts: 8491
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Roth IRA recharacteriztion: do I need to file amended return?

Post by Alan S. » Sat Feb 27, 2016 1:34 pm

The IRS now has the same 1099R that you do for the recharacterization. They can see that the amount actually transferred was 3136, so there is no need to amend your 2014 return at this point just to tell them that. One of the main purposes of the explanation is telling the IRS what you did a year before they would find out anyway from the 1099R.

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