Vanguard 1099-R Backdoor Roth

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Topic Author
MinimalZen
Posts: 15
Joined: Sun Jan 08, 2012 5:46 am

Vanguard 1099-R Backdoor Roth

Post by MinimalZen » Sun Jan 15, 2012 7:30 am

For 2010 and 2011 I invested 10k into Traditional IRA and converted to Roth IRA within a day or two of initial deposit. I did file a Form 8606 for the 2010 contribution for 5000 and will again this year for 2011.

Now I have a 1099-R from Vanguard that shows

Box 1: Gross distribution: 10000.14
Box 2: Taxable amount: 10000.14
Box 3: Taxable amount not determined: X
Box 4: Fed income tax withheld: 0.00
Box 7: Distribution code: 02

I am confused about 2 things here:

1. The initial deposit is indeed post-tax into a Traditional IRA then rolled over to Roth, so it should not be taxable twice.
2. How do I tell TurboTax and Vanguard to behave? :D

sscritic
Posts: 21858
Joined: Thu Sep 06, 2007 8:36 am

Re: Vanguard 1099-R Backdoor Roth

Post by sscritic » Sun Jan 15, 2012 8:46 am

Did you read the back of your 1099-R where the instructions are?
Box 2a. This part of the distribution is generally taxable. If there is no entry in this box, the payer may not have all the facts needed to figure the taxable amount.
But,
Box 2b. If the first box is checked, the payer was unable to determine the taxable amount, and box 2a should be blank, except for an IRA.
and what about the code?
1—Early distribution, no known exception (in most cases, under age 59 1⁄2).
2—Early distribution, exception applies (under age 59 1⁄2).
You are not a 1, you are a 2: exception
So Vanguard behaved properly as I read it. Now to get TT to behave properly, you have to look and see what they actually do. Have you entered this yet? What happened? Did they ask you any questions about what part is taxable? Did they ask what your basis was? I don't use TT and I haven't made any non-deductible contributions and I haven't done any conversions, but I do know that if TT does it wrong, you just go ahead and put in the correct numbers. That's what I have always done when my tax software hasn't followed the rules correctly.

JDCPAEsq
Posts: 1835
Joined: Mon Mar 05, 2007 3:58 pm
Location: Southwest Florida

Re: Vanguard 1099-R Backdoor Roth

Post by JDCPAEsq » Sun Jan 15, 2012 9:18 am

You will complete IRS Form 8606 on your return which will take care of this.
John

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tfb
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Re: Vanguard 1099-R Backdoor Roth

Post by tfb » Sun Jan 15, 2012 12:37 pm

MinimalZen wrote:For 2010 and 2011 I invested 10k into Traditional IRA and converted to Roth IRA within a day or two of initial deposit. I did file a Form 8606 for the 2010 contribution for 5000 and will again this year for 2011.

Now I have a 1099-R from Vanguard that shows

Box 1: Gross distribution: 10000.14
Box 2: Taxable amount: 10000.14
Box 3: Taxable amount not determined: X
Box 4: Fed income tax withheld: 0.00
Box 7: Distribution code: 02

I am confused about 2 things here:

1. The initial deposit is indeed post-tax into a Traditional IRA then rolled over to Roth, so it should not be taxable twice.
2. How do I tell TurboTax and Vanguard to behave? :D
See complete steps with screenshots here: How To Report Backdoor Roth In TurboTax

You converted 2010 contribution in 2011. You will need $5,000 in that "Let's Find Your IRA Basis" screen. Maybe TurboTax is smart enough to pick it up for you automatically.
Harry Sit, taking a break from the forums.

Topic Author
MinimalZen
Posts: 15
Joined: Sun Jan 08, 2012 5:46 am

Re: Vanguard 1099-R Backdoor Roth

Post by MinimalZen » Mon Jan 16, 2012 1:51 pm

tfb wrote:
MinimalZen wrote:For 2010 and 2011 I invested 10k into Traditional IRA and converted to Roth IRA within a day or two of initial deposit. I did file a Form 8606 for the 2010 contribution for 5000 and will again this year for 2011.

Now I have a 1099-R from Vanguard that shows

Box 1: Gross distribution: 10000.14
Box 2: Taxable amount: 10000.14
Box 3: Taxable amount not determined: X
Box 4: Fed income tax withheld: 0.00
Box 7: Distribution code: 02

I am confused about 2 things here:

1. The initial deposit is indeed post-tax into a Traditional IRA then rolled over to Roth, so it should not be taxable twice.
2. How do I tell TurboTax and Vanguard to behave? :D
See complete steps with screenshots here: How To Report Backdoor Roth In TurboTax

You converted 2010 contribution in 2011. You will need $5,000 in that "Let's Find Your IRA Basis" screen. Maybe TurboTax is smart enough to pick it up for you automatically.
Thank you tfb!
The download version of TurboTax is a little different but essentially it answered the question.

I am sure a lot of people would benefit from this in the coming weeks.

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