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In preparation for the 4/15 deadline, see our most popular resources on the Hot Topics page. Lacerte | ProConnect | ProSeries
In preparation for the 4/15 deadline, see our most popular resources on the Hot Topics page. Lacerte | ProConnect | ProSeries
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Recharacterization of ROTH IRA
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AnmarieA
Level 5
yesterday
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I have a client who contributed to a ROTH IRA for his spouse in 2024 for $15K, $7500 for 2023 before 4/15/24 and $7500 for 2024 which as soon as I found out about it I requested the client to remove the funds from the ROTH account as his income exceeded the threshold allowing such contributions. The broker returned the money plus any earnings back into the client's non-qualified account. So the %15K plus $2K in earnings were sent back. The client received 3 1099-s as follows:
- 1 for the 2023 Gross Distribution $7487 coded N with no amount in Box 2a
- 1 for the 2024 Gross Distribution $8498 coded R with no amount in Box 2a
- 1 for $16486 with the same amount in Box 2a
This client's spouse has no other Traditional IRA accounts and only the ROTH account. Is the $16486 fully taxable or only the earnings? These contributions were funded out of non-qualified funds/post tax money so does the taxpayer pay tax on the total amount since he returned the funds by 4/5/24? I tried putting the information in the Form 8606 but it does not change anything on the return and the full amount is showing as taxable. Feedback please.
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