Need help with Total Basis in Traditional IRA due to re-characterization

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Topic Author
chen1991
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Joined: Tue Mar 20, 2018 9:27 pm

Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

For 2022, I contributed $6000 directly in my Roth IRA but then re-characterized/converted in 2022 when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.

For 2023, Turbotax asks me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return." :confused

Am I supposed to entered $0? Or just need to include explanation that $390 was lost in market prior to re-characterization? Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?
Last edited by chen1991 on Thu Apr 04, 2024 6:34 pm, edited 1 time in total.
Alan S.
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by Alan S. »

chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.

For 2023, Turbotax asks me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return." :confused

Am I supposed to entered $0? Or just need to include explanation that $390 was lost in market prior to re-characterization? Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?
Your 2022 8606 should show 6000 as your basis. If you converted the TIRA in 2023, your 2023 8606 should apply that basis resulting in your conversion being non taxable, and 390 remaining on line 14 for future use.
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retiredjg
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by retiredjg »

chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.
The only way line 14 would be $390 is if you converted the tIRA to Roth IRA in 2022. Did you actually do that?

Or did you do this re-characterization and conversion in 2023? If you did the conversion in 2023, your basis at the end of 2022 should be $6000.
Topic Author
chen1991
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

retiredjg wrote: Tue Apr 02, 2024 7:35 pm
chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.
The only way line 14 would be $390 is if you converted the tIRA to Roth IRA in 2022. Did you actually do that?

Or did you do this re-characterization and conversion in 2023? If you did the conversion in 2023, your basis at the end of 2022 should be $6000.
I did re-characterization and converted the tIRA to Roth both in 2022. Thus my 2022 8606 line 14 has $390.
Topic Author
chen1991
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

Alan S. wrote: Mon Apr 01, 2024 9:38 pm
chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.

For 2023, Turbotax asks me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return." :confused

Am I supposed to entered $0? Or just need to include explanation that $390 was lost in market prior to re-characterization? Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?
Your 2022 8606 should show 6000 as your basis. If you converted the TIRA in 2023, your 2023 8606 should apply that basis resulting in your conversion being non taxable, and 390 remaining on line 14 for future use.
I re-characterized/converted the tIRA both in 2022.
Alan S.
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by Alan S. »

chen1991 wrote: Thu Apr 04, 2024 6:35 pm
Alan S. wrote: Mon Apr 01, 2024 9:38 pm
chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.

For 2023, Turbotax asks me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return." :confused

Am I supposed to entered $0? Or just need to include explanation that $390 was lost in market prior to re-characterization? Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?
Your 2022 8606 should show 6000 as your basis. If you converted the TIRA in 2023, your 2023 8606 should apply that basis resulting in your conversion being non taxable, and 390 remaining on line 14 for future use.
I re-characterized/converted the tIRA both in 2022.
OK, that changes things. Most of these recharacterizations occur in the following year once the prior year MAGI is clear. However, since you completed the recharacterization in 2022, line 14 of your 2022 8606 should show $390 with the 2022 6000 ND contribution on lines 1, 3, and 5. Therefore, your 2022 8606 is correct.

If you filed 2022 with Ttax, and the 2022 Form 8606 line 14 was $390 and you checked that, I don't know why Ttax for 2023 does not bring that amount forward to line 2 of the 2023 8606. What TIRA activity did you have in 2023, did you make a 2023 ND contribution?
Topic Author
chen1991
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Joined: Tue Mar 20, 2018 9:27 pm

Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

Alan S. wrote: Thu Apr 04, 2024 7:08 pm
chen1991 wrote: Thu Apr 04, 2024 6:35 pm
Alan S. wrote: Mon Apr 01, 2024 9:38 pm
chen1991 wrote: Mon Apr 01, 2024 9:27 pm For 2022, I contributed $6000 directly in my Roth IRA but then later re-characterized when I realized I did not meet the income requirement. During this period, I had lost $390 to the market, thus my 8606 line 14 indicated my total basis in traditional IRAs for 2022 and earlier years was $390 on my 2022 tax return.

For 2023, Turbotax asks me what's my total basis as of Dec 31, 2022 based on form 8606, I entered $390 but I get a message saying "The IRA basis we transferred from 2022 is different from the basis entered. Include a brief explanation of why xx's IRA basis changed with your return." :confused

Am I supposed to entered $0? Or just need to include explanation that $390 was lost in market prior to re-characterization? Shouldn't this value be auto-transfer when I uploaded my 2022 tax return?
Your 2022 8606 should show 6000 as your basis. If you converted the TIRA in 2023, your 2023 8606 should apply that basis resulting in your conversion being non taxable, and 390 remaining on line 14 for future use.
I re-characterized/converted the tIRA both in 2022.
OK, that changes things. Most of these recharacterizations occur in the following year once the prior year MAGI is clear. However, since you completed the recharacterization in 2022, line 14 of your 2022 8606 should show $390 with the 2022 6000 ND contribution on lines 1, 3, and 5. Therefore, your 2022 8606 is correct.

If you filed 2022 with Ttax, and the 2022 Form 8606 line 14 was $390 and you checked that, I don't know why Ttax for 2023 does not bring that amount forward to line 2 of the 2023 8606. What TIRA activity did you have in 2023, did you make a 2023 ND contribution?
Yes I did make a ND contribution in 2023 - contributed 6500 to tIRA and convert to Roth both in 2023.
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retiredjg
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by retiredjg »

I don't know why you got the question about it. I have not heard of this happening before. The way I see it, you do have $390 in basis and should enter that on line 2.
Topic Author
chen1991
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

retiredjg wrote: Thu Apr 04, 2024 7:38 pm I don't know why you got the question about it. I have not heard of this happening before. The way I see it, you do have $390 in basis and should enter that on line 2.
If I manually type in $390, do I have to provide explanation? Or just said from line 14 of 2022 form 8606 will be sufficient?
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retiredjg
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by retiredjg »

chen1991 wrote: Thu Apr 04, 2024 7:59 pm
retiredjg wrote: Thu Apr 04, 2024 7:38 pm I don't know why you got the question about it. I have not heard of this happening before. The way I see it, you do have $390 in basis and should enter that on line 2.
If I manually type in $390, do I have to provide explanation? Or just said from line 14 of 2022 form 8606 will be sufficient?
Don't know. Sounds reasonable to me. I wonder what happens if you don't type anything into the box?
Topic Author
chen1991
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by chen1991 »

When I don’t type in anything in the 2022 total basis, I checked the 2023 8606 form it just said 0 total basis 😳 taxable amount 1$ (interest generated from backdoor conversion)

When I typed in $390, taxable amount changed to 0$ with $389 for 2023 total basis
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retiredjg
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Re: Need help with Total Basis in Traditional IRA due to re-characterization

Post by retiredjg »

chen1991 wrote: Fri Apr 05, 2024 3:54 pm When I don’t type in anything in the 2022 total basis, I checked the 2023 8606 form it just said 0 total basis 😳 taxable amount 1$ (interest generated from backdoor conversion)

When I typed in $390, taxable amount changed to 0$ with $389 for 2023 total basis
Did you get this figured out?
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