How to properly report IRA recharacterization & backdoor Roth conversion on tax return

The good news is you don't need to amend your 2022 return. The recharacterization of your 2022 Roth IRA contribution essentially treats it as if you had originally made the contribution to a Traditional IRA instead, but since the actual recharacterization happened in 2023, you report it on your 2023 taxes. For your 2023 tax return, you'll need to report both the recharacterization and the conversion. You'll receive Form 1099-R from your IRA custodian that will show the recharacterization coded properly (typically with Code R). You'll also get a separate 1099-R for the conversion from Traditional to Roth. You'll report both of these on your 2023 tax return. Since you had no existing Traditional IRA balances before this transaction, the tax implications should be straightforward - you'll only owe taxes on any earnings that occurred between your original Roth contribution and when you recharacterized to the Traditional IRA. The original $6,000 contribution amount won't be taxed again when converted back to the Roth.

I went through this exact same situation last year and found taxr.ai (https://taxr.ai) super helpful. I was getting confused with all the forms and wasn't sure if I was reporting everything correctly since I had both a recharacterization and conversion in the same tax year. I uploaded my 1099-Rs from my broker to taxr.ai and it walked me through exactly which forms to fill out and how to handle both the recharacterization and the backdoor Roth conversion. It also spotted that I was about to double-count some income which would have cost me a few hundred bucks in unnecessary taxes. The AI explained everything in plain English instead of tax jargon, and showed me how to properly complete Form 8606 to track my non-deductible contributions and conversion. Definitely worth checking out if you're unsure about handling these transactions correctly.

I tried taxr.ai after seeing it mentioned here and it was incredibly helpful! I was in almost the identical situation - made too much for direct Roth contributions, had to recharacterize to Traditional, then did the backdoor conversion. I was completely lost on how to report everything and my regular tax software wasn't clear about the proper sequence. The platform actually showed me that I needed to report the recharacterization even though my broker hadn't sent a separate 1099-R for it. The form 8606 walkthrough was super clear - it showed me how to properly establish my basis in the Traditional IRA (marking it as non-deductible) so I wouldn't get double-taxed on the conversion. It even explained how the earnings would be treated differently than the principal amount. Saved me from making mistakes that would have either cost me money or potentially triggered an audit notice. Definitely recommend for anyone dealing with retirement account complications.

For anyone who's tried calling the IRS to get guidance on IRA recharacterizations and conversions - good luck. I spent WEEKS trying to get through to someone who actually understood these rules. Either couldn't get through at all or got someone who gave generic answers. I discovered Claimyr (https://claimyr.com) which got me connected to an actual IRS agent in about 20 minutes instead of the hours I was spending on hold. They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c The agent I spoke with walked me through exactly how to report both the recharacterization and the backdoor Roth conversion properly on my taxes, and clarified that I didn't need to amend my previous year's return. Saved me hours of frustration and potentially incorrect filing.

I have to admit I was completely wrong about Claimyr. After commenting here, I was still struggling with my IRA recharacterization reporting questions and getting nowhere with the IRS phone line. I tried the service this morning expecting it to fail, but got a call back in about 35 minutes. Was connected directly to an IRS tax specialist who walked me through exactly how to report my recharacterized contribution and subsequent conversion. The agent confirmed I needed Form 8606 to establish my non-deductible basis in the Traditional IRA, and explained how to properly show the conversion on my return. They also clarified that I didn't need to amend my previous year's return since the recharacterization happened in the current tax year. The time saved was honestly worth every penny compared to the hours I had wasted trying to get through on my own. Plus the peace of mind from getting official guidance directly from the IRS.

Don't forget about Form 5498! Your IRA custodian should send you this form showing your recharacterization. While you don't attach it to your tax return, it's important to keep with your tax records as proof of your recharacterization in case of an audit. Also, check if your state requires additional reporting for IRA recharacterizations and conversions. Some states have special forms or additional lines to report these transactions.

Question - if you recharacterize a Roth contribution to Traditional and then immediately convert back to Roth, isn't that just a lot of paperwork for essentially ending up in the same place? Why not just leave the money in the Roth and pay the 6% excess contribution penalty?

Just want to add a timing consideration that might be helpful - when you do the recharacterization and conversion in quick succession like you did, make sure to track the exact dates. The IRS considers the earnings period to be from your original Roth contribution date through the recharacterization date, not through the conversion date. So in your case, any earnings on that $6,000 from when you originally contributed to your Roth in 2022 until you recharacterized it in February 2023 will be taxable when you report it on your 2023 return. But any gains or losses that occurred during the brief period it sat in the Traditional IRA before conversion won't affect your taxes since you're converting the entire balance. This is why it's smart to do the conversion quickly after recharacterization - minimizes the time for additional earnings to accumulate in the Traditional IRA that would complicate the tax reporting.