Vanguard properly processed your recharacterization, so your 2022 tax return should have reflected a $7,000 Roth IRA contribution (generally not reportable unless it qualified you for a Retirement Savings Contributions Credit or was an excess contribution), no traditional IRA contribution on Schedule 1 line 20 or Form 8606 line 1. If your 2022 tax return shows a traditional IRA contribution, you need to amend.
Along with showing no traditional IRA contribution, your 2022 tax return should have included an explanation statement describing the recharacterization of the $7,000 contribution that resulted in a transfer of $6,xxx due to investment loss. You'll be receiving a code R 2023 Form 1099-R that reports the recharacterization, but the explanation statement with the 2022 tax return takes its place, so this Form 1099-R does not need to be reported. Entering it into 2023 TurboTax will just cause TurboTax to remind you that the recharacterization needed to be reflected on your 2022 tax return. Nothing about the recharacterization goes on your 2023 tax return, but make sure that TurboTax shows the $7,000 as part of your Roth IRA contribution basis and is not shown as part of your basis in nondeductible traditional IRA contributions, if any.
If you need to amend your 2022 tax return, you'll need to include the explanation of the recharacterization. If you don't need to amend but your 2022 tax return did not include the explanation, just keep records incase the IRS asks for the explanation.
Finally, you'll receive a 2023 Form 5498 that confirms the recharacterization contribution of $6,xxx.
