greg19972003[at]yahoo.com (Greg O.) wrote:

- quote -

I believe Greg refers to the same transaction as a
"recharacterization" in one sentence, then as a "conversion"
in the following sentence.

I believe Greg started with a traditional IRA in May, 2002.

Perhaps Greg will clarify what he requested Vanguard to do
in Feb, and what kind of IRA he started out with?

Rob Nyberg (Unenrolled tax return preparer)

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- quote -

Greg did a RECHARACTERIZATION, not a conversion. Greg is
correct. Vanguard screwed up.

Barry Picker, CPA/PFS, CFP

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- quote -

My apologies if my reply to the original poster is already
in the queue.

He requested a recharacterisztion, not a conversion. The
stated deadline for that IS April 15, with the actual
deadline being October 15 if the proper provisions of
the Code are respected.

It appears they procesed it as an improper conversion.

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- quote -

Since this was a recharacterization, the $62 isn't taxed.

Phil Marti
Topeka, KS

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- quote -

Unfortunately, the deadline for 2002 Roth IRA conversions
was Dec 31, 2002, not April 15 of the following year.

Your 2002 $3500 contribution to your tradition IRA was
nondeductible, as you say. You submitted Form 8606 with
your 1040 to report your nondeductible contribution.

You completed a conversion to your Roth IRA in 2003. To the
extent that converted amounts include the nondeductible
basis in a traditional IRA, the conversion is not taxable.
This seems to me to be your situation, and the meaning of
"2" in your 1099-R, box 7. You will use Form 8606 again to
report your conversion.

Should your 2003 modified AGI be greater than $100,000, OR
your filing status be married filing separate (unless not
living together for the entire year), then you have made a
"failed conversion," and there is more to do. (2003
Publication 17, p. 137)

That's how I see your situation. Publication 590 will help
you, too.

Yours,
Rob Nyberg (Unenrolled tax return preparer)

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"Harlan Lunsford" <lunstax[at]bellsouth.net> wrote:
- quote -

In a recharacterization, NOTHING would be taxable, not even
the $62. I have no idea how to get Vanguard to correct the
1099R. I'd file the return correctly ($3562 in 15a, zero in
15b), and deal with it with the IRS later, if necessary.
But I'd tell Vanguard that I'm holding them responsible for
the incorrect 1099R. I'd specifically give that message to
the higher ups in their legal department.

Barry Picker, CPA/PFS, CFP

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Greg O. wrote:

- quote -

You're going to reporot the 3562 on line 16a (gross) and
only 62$ on line 16b. Attach an explanation to your return.

Cheer$,
harlan Lunsford, EA n LA

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In May 2002 I opened an IRA with Vanguard and contributed
$3500 in it (I'm over 50y.o.). In September 2002 my employer
offered a 401k plan, and I became a participant. In
February 2003, while preparing my taxes for 2002 I figured
out that I was not allowed to deduct that contribution due
to AGI phaseout. That time I asked Vanguard to
recharacterize my contribution from traditional IRA to a
Roth IRA. I completed that conversion in February 2003,
before the dead line (April 15, 2003). I didn't deduct
that contribution of $3500 from my income in 2002. This year
Vanguard issued a 2003 Form 1099-R with a Distribution Code:
2 and Taxable Amount of $3562 (basis + interest). This is
definitely wrong form but Vanguard refused to change it.
What I'm going to do?

Thanks for any helpful advice.
Greg.

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