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I have a client who recharacterized an IRA contribution. He…

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I have a client...

I have a client who recharacterized an IRA contribution. He received a form 1099 R with code N. How do I handle those on the tax return?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

1099R has $47525, taxable amount not determined and total distribution boxes checked. Distribution code in N

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Is this amount taxable? If not, how do I make it not taxable on the tax return? no

Submitted: 3 months ago.Category: Tax
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4/3/2018
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,639
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Likely, the full amount will be taxable.

When the conversion is from an IRA to a Roth IRA the amounts will be reported on line 15a is $47525 and 15b. 15b is for the taxable distribution amount.

___

The taxable amount is any amount that is above the clients cost basis in the IRA. ---Typically, a client will not have a cost basis in an IRA and the full amount would be taxable. ---When the taxable amount is not determined, the burden of proof to prove cost basis in the IRA is on the client.

As you likely know Code N is for a recharacterization of an IRA contribution.

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Customer reply replied 3 months ago
He went from a Roth to a Traditional IRA. He had another 1099R with distribution code 1 for 47625. So his total taxable amount would be 92k plus? Doesn't seem right.
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

When the amount is transferred from a Roth to a traditional IRA the amount is not taxable, and thus not placed on line 15b

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Any growth within the Roth IRA of the clients original contribution to the Roth will be taxable in the conversion.

The growth over the original contribution will be the amount reported on 15b

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Customer reply replied 3 months ago
Ok, last question. Do you put in any amount for IRA contributions for tax year 2017?
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

To report non deductible contributions to an IRA you will complete form 8606

I have included a link to the instructions below

https://www.irs.gov/pub/irs-pdf/i8606.pdf

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Hello,

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If you have any follow up questions please don't hesitate to Ask.

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I look forward to working with you in the future and I hope you feel that I provided you with 5 Star services

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Chad CFP ® professional

Federally Licensed IRS Enrolled Agent

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Hello,

Are you satisfied with the Answer you received?

If you have any follow up questions please don't hesitate to Ask.

You can rate me by using the stars, or faces on your screen and clicking submit

I look forward to working with you in the future and I hope you feel that I provided you with 5 Star services

Regards,

Chad CFP ® professional

Federally Licensed IRS Enrolled Agent

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 3 months ago

Please let me know if this has answered your question or if you have any additional questions.

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Thank you!

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