After putting my recharacterization and backdoor Roth IRA contributions in, TT is showing a $9600 distribution

[mf86]

In June 2023 I had partially contributed to a Roth IRA. 

When I realized that sale of some stock may put me over the MAGI limit, I performed a recharacterization of $2,948.84 (my contributions up to that point).

I then contributed them to a Traditional IRA, then performed a Backdoor Roth IRA conversion within Vanguard.

As of January 2024, I have received two 2023 1099-Rs from Vanguard:

• Traditional IRA
  • Gross Distribution: $6,738.39
  • Taxable Amount: $6,738.39
  • Distribution Code: 2
• Roth IRA
  • Gross Distribution: $2,948.84
  • Taxable Amount: $0.00
  • Distribution Code: N

When I follow the steps as directed by Turbotax for documenting a backdoor Roth I end up on the summary page, under Wages & Income, saying "Here's your 1099-R info" that shows:

VANGUARD FIDUCIARY TRUST COMPANY (this is the Traditional)	$6,738.39
VANGUARD FIDUCIARY TRUST COMPANY (this is the Roth)	$2,948.84
Total	$9,687.23

Turbotax is adding these distributions together and seems to imply that I took distributions from these accounts, which I did not --

• the distribution from the Roth is the amount I backed out via the "recharacterization" process
• the distribution from the Traditional seems to be the total backdoor amount that was moved to Roth, but Vanguard's dashboard shows I contributed a total of $6500 for the year (the annual limit). 

And I notice that the amount of federal refund and state due have decreased and increased, respectively. 

I want to make sure I'm documenting this correctly and not being overpenalized due to a mistake on my part. This is my first tax year completing a backdoor roth and that's further complicated by the recharacterization I had to do.

Thanks in advance for any advice you can give.

[dmertz · Accepted solution]

"Distribution" simply means a transaction that is reportable on your tax return, so you indeed had distributions from both accounts as defined in the tax code.  A distribution is also termed "income" under the tax code, so the total of $9,687.23 shown by TurboTax is correct.  The recharacterization, however, is nontaxable income, reflected in the fact that it is excludible from the amount on line 4b of Form 1040.  TurboTax automatically excludes from line 4b any amount reported with code N.

With regard to the Roth conversion reported on the code-2 Form 1099-R, the taxable amount is calculated on Form 8606 and included on line 4b.

[mf86]

Hi dmertz, thank you for the reply and the clarifications. 

So am I to assume that the amount by which my refunds have changed is valid, if the underlying calculations are valid? 

What is it that I am paying taxes on?

[dmertz]

You are paying taxes on the taxable amount of the Roth conversion, calculated on Form 8606.