Vanguard Traditional IRA Brokerage Account 1099-R

[ta_nyc]

Hello -

In 2023, I opened a Traditional IRA Brokerage Account with Vanguard so I could make what is called a Backdoor Roth IRA contribution (because of income limits I no longer qualify for a Roth IRA). In 2023, I made a $6,000 contribution to my Traditional IRA Brokerage Account for tax year 2022. I reported this amount on Form 8606 when filing my 2022 taxes. I then converted this to a Roth IRA in 2023 (this will be reported on form 8606 when filling my 2023 taxes). In 2023, I also contributed $6,500 to my Traditional IRA Brokerage Account for tax year 2023. I then converted this to a Roth IRA in 2023. Both transactions will be reported on Form 8606 when filing my 2023 taxes.

That said, I recently received a tax document from Vanguard called 2023 Form 1099-R. Below are the values on the form. I need help understanding what they mean and how I should report these numbers when filing my 2023 taxes. Please help me understand what is being reported here.

1. Gross distribution = $12,503.58

2a Taxable Amount = $12,503.58

2b Taxable amount not determined = (X)

       Total distribution = (X)

7 Distribution code(s) = 2

    IRA/SEP/SIMPLE = (X)

8 Other amount

   Other amount percentage = %

9a Your percentage of total distribution = %

12 FATCA filing requirement = ( )

16 State distribution = $12.503.58

In 2022 on Form 8606, I reported the $6,000 contribution to a Traditional IRA

In 2023 on Form 8606, I need to report the $6,000 conversion to a Roth IRA

In 2023 on Form 8606, I need to report the $6,500 contribution to a Traditional IRA and then converting to a Roth IRA

The Vanguard Form 1099-R states $12,503.58 and not $12,500 (2022 = $6,000 & 2023 = $6,500). The difference is because the value of the contribution grew as I was converting from a Traditional IRA to a Roth IRA. I am assuming I will have to pay taxes on the $3.58.

Please help me understand how to correctly report the necessary information when filing my taxes.

Thank you so much

[ta_nyc]

Hello -

I wanted to check in regarding my initial post. Can someone help me with my tax questions?

Thank you

[MarilynG1]

Here's How to Enter a Back-Door Roth Conversion.  It's a two-step process.

You’ll receive a Form 1099-R with code 2 in box 7 (or code 7 if your age is over 59 ½) in the year you make your Roth conversion. You should report your conversion for the year you receive this 1099-R:

• If you received this form in 2023, complete both steps to report it on your 2023 taxes.
• If you'll receive this form in 2024, wait to report it on your 2024 taxes. In this case, only complete Step 1 for your 2023 taxes. You’ll complete both steps next year when filing your taxes for 2024.

Form 8606 will be prepared for you in TurboTax as you go through the interview.  Here's more info on Form 8606. 

[ta_nyc]

Hello -

Thank you.

I received 2023 Form 1099-R. What do the below values mean? The only part you clarified was code 2 in box 7.  What does everything else mean in layman's terms?

1. Gross distribution = $12,503.58

2a Taxable Amount = $12,503.58

2b Taxable amount not determined = (X)

       Total distribution = (X)

7 Distribution code(s) = 2

    IRA/SEP/SIMPLE = (X)

8 Other amount

   Other amount percentage = %

9a Your percentage of total distribution = %

12 FATCA filing requirement = ( )

16 State distribution = $12.503.58

Thank you.

[dmertz · Accepted solution]

1:  The actual amount transferred to the Roth IRA

2a:  What the taxable amount would be if you had no basis in nondeductible traditional IRA contributions.

2b Taxable amount not determined:  The actual taxable amount must be determined on Form 8606.

2b Total distribution:  This transaction emptied the traditional IRA account.

7:  Code 2 with the IRA/SEP/SIMPLE box being marked:  The transaction came from a traditional IRA and there is no early-distribution penalty on the transaction.

8:  Meaningless for this type of transaction.

9a:  Meaningless for this type of transaction.

12:  Meaningless for this type of transaction.

16:  The amount that the state considers to be reportable, always the same as the amount in box 1 for this type of transaction.

[ta_nyc]

thank you so much!