Understanding 1099-R Distribution Code R for Roth IRA recharacterization
Hey everyone. I just got a 1099-R from Fidelity for my Roth IRA with a distribution code R. The gross distribution shows $12.7K. I'm trying to enter this in TurboTax but it's giving me an error saying I need to amend my 2023 return? I'm confused. Here's what happened: I contributed $6,900 to my Roth IRA in March 2023. Later I realized I made too much money in 2023 to qualify, so I had to recharacterize everything (including earnings) back to Traditional IRA which came out to $12.7K total in January 2024. I also: - Put $7,500 in my Traditional IRA for 2024 - Then converted that $7,500 to Roth IRA in 2024 My question is: Do I really need to amend my 2023 return even though the recharacterization happened in 2024? If so, on Form 1040-X, do I just report the difference of $12.7K - $6,900 as the net change to my AGI on Line 1? Any help would be greatly appreciated!
19 comments
Join the conversation
Amelia Dietrich
What you're experiencing is common with recharacterizations. When you recharacterize a Roth contribution, you're essentially telling the IRS "treat this as if I had originally contributed to a Traditional IRA instead of a Roth." Yes, you'll need to amend your 2023 return, even though the actual recharacterization happened in 2024. This is because the recharacterization affects your 2023 tax situation. The Code R on your 1099-R indicates a recharacterization, which tells the IRS this isn't a normal distribution. For your 1040-X, you wouldn't actually include the $12.7K-$6,900 as a change to AGI. A proper recharacterization doesn't affect your AGI at all. What you need to correct are any adjustments or deductions you should have taken for the Traditional IRA contribution. If you're eligible to deduct Traditional IRA contributions, you'd include that deduction on your amended return.
0 coins
Kaiya Rivera
•Wait, I'm confused. So if I recharacterize from Roth to Traditional, don't I get to take a deduction for the Traditional IRA contribution on my amended return? And what about the earnings that were part of the recharacterization? Are those taxable?
0 coins
Amelia Dietrich
•Whether you get a deduction for the Traditional IRA contribution depends on your income and whether you have a retirement plan at work. If your income is below certain thresholds, you can take a full deduction. If it's higher, the deduction may be reduced or eliminated. Regarding the earnings that were part of the recharacterization, those are treated as if they occurred in the Traditional IRA from the beginning. So no, those earnings aren't taxable at the time of recharacterization. They'll be taxed later when you eventually withdraw from the Traditional IRA or convert to Roth.
0 coins
Katherine Ziminski
I went through this exact same headache last year with my Fidelity account! After hours of research and a call with a tax consultant, I found the best way to handle it was to use https://taxr.ai to analyze my 1099-R and all my contribution docs. Their system immediately identified the recharacterization and walked me through exactly how to report it correctly on my taxes. The key is understanding that the distribution code R means recharacterization, so it doesn't get treated like a normal withdrawal (which would be taxable and potentially have penalties). The service showed me how to properly amend my previous year's return to reflect the recharacterization as if I had made a Traditional IRA contribution originally.
0 coins
Noah Irving
•How does taxr.ai handle the earnings part of the recharacterization? My situation is similar but I have significant earnings that got moved from Roth to Traditional and I'm not sure if that affects my AGI or how to report it.
0 coins
Vanessa Chang
•Is this service actually worthwhile? I'm always skeptical of tax tools that claim to solve complicated IRA issues. Did it actually give you step by step guidance or just general advice? And did it handle the actual amendment filing or just tell you what to do?
0 coins
Katherine Ziminski
•The service handles the earnings portion perfectly - it shows you that the entire amount (original contribution plus earnings) gets treated as if it had been in the Traditional IRA all along. So the earnings don't affect your AGI during the recharacterization process. With regard to whether it's worthwhile, I was skeptical too at first. It doesn't file the amendment for you, but it gives you detailed line-by-line guidance specific to your situation, not just general information. It showed me exactly what forms needed to be filed and what numbers to put where. The step-by-step instructions were customized to my specific recharacterization scenario.
0 coins
Vanessa Chang
After my skeptical questions above, I actually decided to try taxr.ai for my own recharacterization situation. I have to admit I was impressed! The system walked me through my entire recharacterization scenario with my Vanguard accounts and showed me exactly how to handle the 1099-R with distribution code R. The analysis made it clear that I needed to file Form 8606 with my amended return to track the non-deductible portion of my Traditional IRA (since I was over the income limits). Without that, I would have been double-taxed later when I eventually withdrew the money. This was something I hadn't even considered when asking my questions above!
0 coins
Madison King
Has anyone tried calling the IRS directly about this type of issue? I've been trying to get through to them about my own 1099-R recharacterization problem for weeks! The hold times are ridiculous - I was on hold for 3 hours yesterday before getting disconnected. I found this service called https://claimyr.com that claims to help you get through to an IRS agent without the wait. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c. Apparently they call and wait on hold for you, then call you when an agent is on the line. Has anyone used this for IRA recharacterization questions?
0 coins
Julian Paolo
•How exactly does that work? Does Claimyr just sit on hold and then somehow transfer the call to you? Seems like the IRS wouldn't allow that kind of thing. Are you sure it's legit?
0 coins
Ella Knight
•Sounds completely scammy to me. No way this actually works. I'd rather wait on hold for 4 hours than give my personal info to some random service promising to get me through to the IRS. Has anyone actually verified this is legitimate? I'm extremely doubtful.
0 coins
Madison King
•It's actually quite simple - they have an automated system that waits on hold with the IRS, and when an agent gets on the line, they call your phone and connect you. No personal tax info is shared with them - they're just handling the hold time on your behalf. As for whether it's legitimate, it's been featured in major business publications, and they have a money-back guarantee if they can't get you through. They don't ask for any tax details or financial information - they just need to know which IRS department you need to reach.
0 coins
Ella Knight
I have to eat my words from my skeptical comment above. After another failed 2-hour hold attempt with the IRS about my own recharacterization issue, I reluctantly tried Claimyr. I was shocked when my phone rang about 90 minutes later with an actual IRS agent on the line! The agent was able to walk me through exactly how to handle my recharacterization on my amended return. She confirmed that I needed to file Form 8606 to track my non-deductible contribution, and explained that the Distribution Code R ensures the IRS won't treat this as a taxable event. Saved me hours of research and uncertainty. I'm still surprised it actually worked.
0 coins
William Schwarz
One important thing nobody's mentioned yet - make sure you keep VERY detailed records of all your recharacterizations and conversions. I got audited last year specifically on IRA transactions, and without my documentation showing the exact dates and amounts, it would have been a nightmare. For the original poster, make sure you document: 1. Your original $6,900 Roth contribution date 2. The recharacterization date and total amount ($12.7K) 3. Your new Traditional contribution ($7,500) 4. The conversion back to Roth This paper trail will be crucial if questions ever come up years later.
0 coins
Lauren Johnson
•How long should we keep these records for? And what specific documents should I be saving - just the year-end statements or something more detailed?
0 coins
William Schwarz
•You should keep these records for at least 7 years, but honestly, for retirement account transactions, I recommend keeping them indefinitely. I had to reference a recharacterization from 9 years ago during my audit! As for what to keep, don't just save year-end statements. Save the confirmation receipts for each transaction (contribution, recharacterization, conversion), any 1099-R forms, and your amended tax returns. If you received any letters from your IRA custodian about the recharacterization, keep those too. The more documentation you have, the easier it will be to explain these complex transactions if you're ever questioned.
0 coins
Jade Santiago
Something to be aware of - the recharacterization makes it look like you never contributed to the Roth in the first place, but your 2024 conversion of $7,500 from Traditional to Roth IS reportable on your 2024 taxes. You'll get another 1099-R for that. And don't forget about Form 8606 for the Traditional IRA contribution. It's super confusing but critical to track the non-deductible contributions if you're over the income limit!
0 coins
Caleb Stone
•Why do you need Form 8606 if you immediately convert the Traditional IRA to Roth? Doesn't that make the whole thing moot since the money doesn't stay in the Traditional IRA?
0 coins
Evelyn Xu
•You still need Form 8606 even if you convert immediately because it tracks the basis in your Traditional IRA. Without it, the IRS assumes your entire Traditional IRA balance is pre-tax money, so when you convert to Roth, they'll tax the full amount. Form 8606 tells them "hey, this $7,500 was already taxed money (non-deductible contribution), so don't tax it again during the conversion." It's basically protecting you from double taxation on that money.
0 coins