If you have a situation where you made a contribution to a Roth IRA and later recharacterized part or all of it to a traditional IRA the following information and instructions may apply to you.
Per IRS Instructions for Form 8606 Nondeductible IRAs, page 4:
Recharacterizations
Generally, you can recharacterize (correct) an IRA contribution by making a trustee-to-trustee transfer from one IRA to another type of IRA. Trustee-to-trustee transfers are made directly between financial institutions or within the same financial institution. You generally must make the transfer by the due date of your return (including extensions) and reflect it on your return. However, if you timely filed your return without making the transfer, you can make the transfer within 6 months of the due date of your return, excluding extensions. If necessary, file an amended return reflecting the transfer (see Amending Form 8606, later). Write “Filed pursuant to section 301.9100-2” on the amended return.
No recharacterizations of conversions made in 2018 or later. A conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made in tax years beginning after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA.
Reporting recharacterizations. Treat any recharacterized IRA contribution as though the amount of the contribution was originally contributed to the second IRA, not the first IRA. For the recharacterization, you must transfer the amount of the original contribution plus any related earnings or less any related loss. In most cases, your IRA trustee or custodian figures the amount of the related earnings you must transfer. If you need to figure the related earnings, see How Do You Recharacterize a Contribution? in chapter 1 of Pub. 590-A. Treat any earnings or loss that occurred in the first IRA as having occurred in the second IRA. You can’t deduct any loss that occurred while the funds were in the first IRA. Also, you can’t take a deduction for a contribution to a traditional IRA if you later recharacterize the amount. The following discussion explains how to report the two different types of recharacterizations, including the statement that you must attach to your return explaining the recharacterization.
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2. You made a contribution to a Roth IRA and later recharacterized part or all of it in a trustee-to-trustee transfer to a traditional IRA. Report the nondeductible traditional IRA portion of the recharacterized contribution, if any, on Form 8606, Part I. Don’t report the Roth IRA contribution (whether or not you recharacterized all or part of it) on Form 8606. Attach a statement to your return explaining the recharacterization. If the recharacterization occurred in 2022, include the amount transferred from the Roth IRA on Form 1040, 1040-SR, or 1040-NR, line 4a. If the recharacterization occurred in 2023, report the amount transferred only in the attached statement, and not on your 2022 or 2023 tax return.
In the TaxAct program, you will enter the net Roth IRA contribution amount (contribution minus recharacterized amount). Report the nondeductible traditional IRA portion of the recharacterized contribution, if any, on Form 8606, Part I. Don’t report the Roth IRA contribution (whether or not you recharacterized all or part of it) on Form 8606. Attach a statement to your return explaining the recharacterization.
See the instructions for a detailed example on page 5 for further clarification.
To enter or review your IRA contribution entries in the TaxAct program:
To enter or review Form 1099-R Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. in the TaxAct program, go to our Form 1099-R - Entering Distributions from Retirement Plans FAQ.
Because of the recharacterization situation, you need to include a statement with your return. For help including a statement, go to our IRA - Distribution Explanation Attach Statement FAQ.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.