TSP mix-up

[Cdschwark]

Needing some advice on a unique situation...my son was discharged from the Navy in June'22...in Aug '22 we initiated a transfer of his Roth TSP to Vanguard....after some difficulty with the TSP website...we designated the Roth portion of the TSP contributions to his existing Vanguard Roth IRA and the taxable(employer match) to a Vanguard Rollover IRA (established as a result of the transfer)....6 weeks later(Sept'22) we noticed that the entire fund had been deposited into the Rollover IRA....thinking that this was a customary process and that the non-taxable portion would be then transferred to the existing Roth IRA we contacted Vanguard and initiated a request to re-chararcterize the funds to Roth contributions...fast forward to January '23,  and we had received a 1099R from the TSP acknowledging the transfer with Box 2a(the taxable portion empty)....we filed his taxes submitting that 1099R....2 weeks later we received a corrected 1099R denoting that the entire sum had been deposited into a Roth IRA but only a portion of that was non-taxble(so the taxable portion was desposited in the Roth IRA also) which is exactly the opposite of what had happened(we sent in an amended return)...we contacted Vanguard and explained the entire situation...after speaking with several individuals over the next month...they indicated they could not re-characterize the transfers(depositing the non-taxable portion in the Roth IRA) because the designated account number on both checks from the TSP were for the Rollover IRA account...and they always ended with "tax to your tax professional"...what are our options?? (as you cannot file a 1099R from the previous year) and conversions unlike contributions can only be done in the calendar year....should we do a Roth Conversion(for the entire amount) in '23 and file a 8606 for the non-taxable portion as a non-deductible portion on the 8606??....I will definitely be upgrading my Turbo Tax service to address this issue...thanks

[JBedford]

Hi, @Cdschwark , thanks for the question! That's a very thorny one! After discussing with my peers, we are advising you to call in one-on-one with one of our Tax Experts. This one just has too many moving parts to answer adequately here, as your question prompts many other questions. If you've upgraded to TurboTax Live, then you can use this link to schedule a call. 

Hope this helps!