Vanguard 1099 Roth Conversion Error in Statement?

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drzzzzz
Posts: 185
Joined: Sat Sep 22, 2012 9:56 pm

Vanguard 1099 Roth Conversion Error in Statement?

Post by drzzzzz » Tue Mar 13, 2018 6:55 pm

Hi
Planning to call Vanguard, but wanted to confirm my suspicions. My nephew did a non-deductible after-tax IRA contribution at Vanguard and then did a roth conversion a few days later on-line through Vanguard's website. The 1099-R that Vanguard sent has the gross distribution of $5500 in box 1, as well as box 2B checked as not determined and total disbrution, but they also placed in 2a a taxable amount of $5500. I think 2a should have listed a 0 since it was a Roth conversion and this was an after-tax IRA contribution. Box 7 has 02 for early distribution, exception applies (under age 59.5). Without a 0 in box 2a, tax packages are seeing this as a taxable distribution, so I think this is a Vanguard error that they need to correct. Am I missing something here?

stevew7
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Joined: Fri Jan 09, 2009 10:40 am

Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by stevew7 » Tue Mar 13, 2018 7:20 pm

Box 2b should be checked as taxable amount not determined.

Then you will fill out irs form 8606 with your tax return to establish the non deductible contribution in the traditional ira.

drzzzzz
Posts: 185
Joined: Sat Sep 22, 2012 9:56 pm

Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by drzzzzz » Tue Mar 13, 2018 7:21 pm

stevew7 wrote:
Tue Mar 13, 2018 7:20 pm
Box 2b should be checked as taxable amount not determined.

Then you will fill out irs form 8606 with your tax return to establish the non deductible contribution in the traditional ira.
It is checked as taxable amount not determined, but box 2a has the full amount as taxable in Vanguard's form.

stevew7
Posts: 42
Joined: Fri Jan 09, 2009 10:40 am

Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by stevew7 » Tue Mar 13, 2018 7:29 pm

drzzzzz wrote:
Tue Mar 13, 2018 7:21 pm
It is checked as taxable amount not determined, but box 2a has the full amount as taxable in Vanguard's form.
When you make a non-deductible contribution to an IRA, the recordkeeping is your responsibility. You have to fill out the 8606 to establish the non-deductible contribution. Vanguard has no idea if you were making a regular or non-deductible contribution (think about it - how would Vanguard know).

https://ttlc.intuit.com/questions/39334 ... ot-taxable

Alan S.
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Location: Prescott, AZ

Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by Alan S. » Tue Mar 13, 2018 7:45 pm

Yes, it is an IRS requirement that a TIRA distribution (includes conversions) be reported in Box 2a as well as Box 1.

As others have stated, the amount in 2a is actually a provisional amount subject to change by filing Form 8606 AS LONG as the taxable amount not determined box is also checked.

Many years ago, the reporting rules allowed 2a to be left blank, but the IRS discovered that too many people thought took that literally and did not report tax due. So the IRS then required the total distribution to be shown as taxable leaving it up to the taxpayer to establish that it isn't through filing Form 8606 to determine the actual taxable amount.

retiredjg
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Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by retiredjg » Tue Mar 13, 2018 7:54 pm

drzzzzz wrote:
Tue Mar 13, 2018 6:55 pm
I think 2a should have listed a 0 since it was a Roth conversion and this was an after-tax IRA contribution.
How would Vanguard know that it was an after-tax IRA contribution? That is between the tax payer and the IRS.

Keep in mind that no custodian knows whether a contribution is eligible to be deductible or not. And even if it could be deductible, it might not have been deducted.

drzzzzz
Posts: 185
Joined: Sat Sep 22, 2012 9:56 pm

Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by drzzzzz » Tue Mar 13, 2018 8:59 pm

Alan S. wrote:
Tue Mar 13, 2018 7:45 pm
Yes, it is an IRS requirement that a TIRA distribution (includes conversions) be reported in Box 2a as well as Box 1.

As others have stated, the amount in 2a is actually a provisional amount subject to change by filing Form 8606 AS LONG as the taxable amount not determined box is also checked.

Many years ago, the reporting rules allowed 2a to be left blank, but the IRS discovered that too many people thought took that literally and did not report tax due. So the IRS then required the total distribution to be shown as taxable leaving it up to the taxpayer to establish that it isn't through filing Form 8606 to determine the actual taxable amount.
Thank you for that explanation, so I can leave 2a blank or with a zero value as long as the 8606 is filed along with it (which I have already filled in).

jebmke
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Re: Vanguard 1099 Roth Conversion Error in Statement?

Post by jebmke » Tue Mar 13, 2018 9:03 pm

yes, leave 2a as zero.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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