1099R code dist R

[vegasbillea]

Client received a 1099R Roth IRA with Distribution Code R (Recharacterization IRA contribution made in 2014 and recharatized in 2015).
I'm just wanting a sanity check on how to handle. I believe the client just converted their 2014 contribution to a Roth, as income was to high to make a direct contribution to the Roth. Since the 2014 contribution was nondeductable, Reading the instructions for 8606, "if you recharacterized the entire contribution, do not report the contribution on form 8606 but you must attached a statement to your return explaining the recharacterization, if the recharacterization occured in 2015.
I just wanted to make sure I need not do a 8606, any help or comments would greatly be appreciated.

[Roland Slugg]

Code R is used in the following situation:

1) Your client made a Roth IRA contribution in 2014
2) When you (or he, or someone else) prepared his 2014 tax returns early in 2015, he either, (a) learned that his 2014 Roth IRA contribution was more than the amount he was allowed to contribute to a Roth IRA for 2014; (b) discovered that he was eligible to deduct a contribution to a traditional IRA for 2014; or (c) simply changed his mind and decided he wanted that Roth IRA contribution to be a traditional IRA contribution ... in whole or in part.
3) Some time before April 15, 2015 he advised the IRA Trustee to "recharacterize" all or a portion of his 2014 Roth IRA contribution by moving it, plus earnings thereon, over to his traditional IRA. The amount moved may have been the full amount he had contributed to his Roth IRA or only a portion.

The amount reported on the 2015 form 1099-R will be for the amount recharacterized, including the earnings thereon. The 1099-R form probably does not have the "IRA" box checked, and that is fine. Your tax prep software should include the 1099-R amount on line 15a but not on line 15b of the taxpayer's F-1040.

If the recharacterized amount was deducted on his 2014 tax return, as a traditional IRA contribution, there is nothing more to do. However, if the recharacterized amount was instead treated as a non-deductible IRA contribution, you should have included a F-8606 in your client's 2014 tax return, with the excess Roth IRA amount listed on line 1 as a non-deductible IRA contribution. That way you correctly track the basis in his IRA.

[vegasbillea]

Thanks You Roland 1099-q

As usual you were very helpful.