Last minute tax help - IRA/Roth

[onthemove]

So in Jan of 2020 I contributed the max to my Roth IRA as always, but come to find out this spring, I was not eligible due to my income. So a month ago, I called vanguard, had the money, plus earnings removed and put into a IRA (I believe this is a recharacterization). Then I took only the 6000 and converted that back into a Roth. I think I did all that right, but now turbotax is really confusing me.

I know I need to pay taxes on the $900 or so in earnings, but it seems to take $800 off my refund, could that really be right? Do I click yes to the recharacterization question even though I did it before the tax deadline? I followed the steps for the backdoor, but because this happened in 2021, my 1099-R is not correct, does this have something to do with it? Will it get sorted on next year's taxes? I will call Vanguard tomorrow, but with it being tax day I don't know how long it will take to get through. Thanks.

[sicilygirl]

You will pay tax on the earnings from your original Roth IRA contribution on next year's tax return (since the distribution from the account happened in 2021). On the 2020 tax return, there should be no tax effect of any of these transactions. You should have a Form 8606 included in your return that shows a $6,000 nondeductible traditional IRA was made in 2020, and that's it. On the 2021 return, you will then show that a $6,000 backdoor Roth contribution was made on that same form. Assuming you do not have any other pre-tax money in IRAs, there should not be any taxable effect of that transaction either.

[onthemove]

Thanks everyone!