How to report an IRA contribution that has been recharacterized twice

BlaizeBFIII
BlaizeBFIII Member Posts: 1 Newcomer
in Filing my taxes

Trying to summarize a long story, I made an error when trying to perform a backdoor Roth IRA in 2025 and accidently recharacterized my Traditional IRA contribution to a Roth instead of converting it. In 2026 I recharacterized it back to a Traditional, and then completed the conversion to Roth as I should have done originally.

As far as I can see it looks like you can only really input one recharacterization for an IRA in FreeTaxUSA. The tax software shows that I over contributed to the Roth, because I don't know how to represent the second recharacterization in 2026 that corrected the overcontribution. I'm not sure how to make this come out correctly on the tax forms.

Details:

  1. In 2025 I made a contribution to a Traditional IRA
  2. In 2025 I accidently recharacterized that contribution to a Roth IRA instead of converting it.
  3. In 2026 I finally realized the error after receiving my 1099-R. I re-recharacterized that contribition back to a Traditional IRA (the IRA has reduced in value so no earnings).
  4. After the second recharacterization was completed I converted it to a Roth.

I filed for and was granted an extension for my 2025 tax return.

In FreeTaxUSA for 2025 I currently have:

  1. Entered the information for my 2025 1099-R (which only covers the first recharacterization from Traditional to Roth) under Income → Common Income → Retirement Income (1099-R)
  2. The contribution has been entered in Deductions / Credits → Common Deductions / Credits → IRA Contributions
    1. Contribution entered as Traditional
    2. Recharacterize = Yes, Recharacterize to Roth = Yes (entered date and amount for first recharacterization)
    3. For "Enter the reason for the recharacterization:" I have "THIS RECHARACTERIZATION WAS AN ERROR, IT WAS MEANT TO BE A CONVERSION. THIS IRA CONTRIBUTION HAS SINCE BEEN FULLY RECHARACTERIZED BACK TO A TRADITIONAL IRA ON XX/XX/2026, IN THE AMOUNT OF $X,****"
    4. For "Did you withdraw any Roth IRA contributions by the tax filing due date" I have "No".
    5. "Enter the total value of your Roth IRA(s) on December 31, 2025:" is currently blank / $0.

I'm assuming what I currently have is not right. What is the correct way of doing this in FreeTaxUSA?

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Answers

  • Henry
    Henry FreeTaxUSA Agent Posts: 164 image
    Hi BlaizeBFIII, unfortunately, this is an unusual transaction history that FreeTaxUSA does not support. The software can report one recharacterization for an IRA contribution, but it cannot accurately report your contribution being recharacterized to Roth and then recharacterized back to Traditional before being converted.

    Because of this limitation, there isn’t a correct way to enter both recharacterizations in the 2025 return. The current entries are causing the software to treat the contribution as remaining in the Roth IRA, which will result in an incorrect excess contribution calculation. Since we cannot accurately prepare the return with this series of transactions, you'll need to find another way to prepare your 2025 tax return. I'm sorry for the inconvenience.

    If you've already paid for the preparation of your 2025 return and won't be able to file with us, please contact our Customer Support team using the Support Center in your account to request a refund.

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