The circumstances suggest that Vanguard's system is not capable of correctly handling the situation where the recharacterization is initiated at the end of the year but not completed until the next. If the recharacterization distribution occurred on December 31, 2020 but the recharacterization contribution did not occur until January 2, 2021, the recharacterization distribution should be reported on a code N 2020 Form 1099-R even though the recharacterization contribution is reported on a 2021 Form 5498. This is referred to as an outstanding recharacterization.
