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  • Backdoor and Vanguard 1099

    I'm currently filing my tax return and going through things with my accountant but having some issues come up. I contributed $5,550 to a TIRA on Vanguard and converted soon after - all in 2017. Vanguard sent me a 1099 listing both the gross distribution (box 1) and taxable amount (box 2a) with an X in box 2b. I had my accountant fill out a 8606 but the $5,500 is still listed on my 1040 on line 15b which is taxable and my accountant's argument is he has to list it there since the 1099 lists it as taxable. On my 8606 currently, lines 1, 3 and 5 list 5,500 with everything on section 1 being blank. I figured it would be listed under 15a since the 8606 essentially trumps the fact that Vanguard is listing it as taxable correct? Or what needs to be fixed here or how do I discuss with my accountant?

    I also contributed 5,500 towards my wife's TIRA in 2017 but didn't convert till 2018 so I'm only reporting a 8606 for the contribution for her. However, her 8606 has lines 1, 3 and 14 listing 5,500 with everything being blank. The 5,500 should be listed on 1,3,5 and 13 unless I'm seeing the tutorial incorrectly and then I'd leave section 2 blank for her since I'd have to list that for 2018 next year.

    Anyone else run into issues with reporting on the 1040 form line 15b with Vanguard's way of reporting IRA 1099 as taxable? Any help is appreciated. Thanks.

  • #2
    If your contribution was nondeductible, that gives you basis, thus rendering the conversion non taxable. So, was your contribution to the TIRA deductible or nondeductible? If it is nondeductible, DO NOT PASS GO, DO NOT COLLECT $200, GET A NEW ACCOUNTANT.

    You will (hopefully) have competent advice by the time you are ready to file your 2018 return and report your wife’s conversion.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      It was nondeductible (post-tax dollars). So it should be listed on 15a correct? Or are nondeductible contributions not even listed on the 1040? I think my accountant is just confused by the 1099 listing the taxable amount as 5,500. Is there anything else I can use to help explain it to him? I’ve already sent the tutorial from this website to him. I should basically just tell him to ignore the 1099 correct? And the IRS won’t send me a CP2000 since the 8606 will explain the 1099 “taxable” income?

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      • #4




        I’m currently filing my tax return and going through things with my accountant but having some issues come up. I contributed $5,550 to a TIRA on Vanguard and converted soon after – all in 2017. Vanguard sent me a 1099 listing both the gross distribution (box 1) and taxable amount (box 2a) with an X in box 2b. I had my accountant fill out a 8606 but the $5,500 is still listed on my 1040 on line 15b which is taxable and my accountant’s argument is he has to list it there since the 1099 lists it as taxable. On my 8606 currently, lines 1, 3 and 5 list 5,500 with everything on section 1 being blank. I figured it would be listed under 15a since the 8606 essentially trumps the fact that Vanguard is listing it as taxable correct? Or what needs to be fixed here or how do I discuss with my accountant?

        I also contributed 5,500 towards my wife’s TIRA in 2017 but didn’t convert till 2018 so I’m only reporting a 8606 for the contribution for her. However, her 8606 has lines 1, 3 and 14 listing 5,500 with everything being blank. The 5,500 should be listed on 1,3,5 and 13 unless I’m seeing the tutorial incorrectly and then I’d leave section 2 blank for her since I’d have to list that for 2018 next year.

        Anyone else run into issues with reporting on the 1040 form line 15b with Vanguard’s way of reporting IRA 1099 as taxable? Any help is appreciated. Thanks.
        Click to expand...


        Vanguard recorded it correctly.  Your accountant did not.  An x in 2b is basically Vanguard saying it doesn't know if it's taxable or not.  He should be showing it on line 13 instead of 15.

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        • #5




          It was nondeductible (post-tax dollars). So it should be listed on 15a correct? Or are nondeductible contributions not even listed on the 1040? I think my accountant is just confused by the 1099 listing the taxable amount as 5,500. Is there anything else I can use to help explain it to him? I’ve already sent the tutorial from this website to him. I should basically just tell him to ignore the 1099 correct? And the IRS won’t send me a CP2000 since the 8606 will explain the 1099 “taxable” income?
          Click to expand...


          You probably want a new accountant, or consider doing your taxes yourself if you are having to walk him through where to record it.  Yes, it should be showing up under 15a on the 1040, and 15b should be $0.

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          • #6
            I’m out of the office and not looking at an 8606 (in the hospital where hubby has just had surgery, coincidentally). Nondeductible contributions are listed on the 8606 which is a form that is filed with your 1040. He needs to use the information on the 1099 to file your 8606. The conversion will go on 15a but not on 15b.

            No, the IRS will not send a CP2000 as a result.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Your accountant is wrong.  Read the description of box 2b for the 1099-R:

              Box 2b. If the first box is checked, the payer was unable to determine the taxable amount, and box 2a should be blank, except for an IRA. It is your responsibility to determine the taxable amount.

              https://www.irs.gov/pub/irs-pdf/f1099r.pdf

              If you are not deducting the TIRA then it is a non-deductible contribution, and you should be able to convert this amount to your Roth with no tax implications, assuming you didn't have any remaining balance in TIRAs, SEPs, SIMPLE plans on Dec 31, 2017.  The place you reconcile this is on the 8606, which also appears to be done incorrectly (per the Roth conversion you did).

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              • #8
                Cgossage - you’re saying line 13 instead of 15 on the 8606 correct? (Not the 1040). And then just tell him to ignore the 2a taxable portion listed on my 1099 right? Thanks.

                Comment


                • #9




                  Cgossage – you’re saying line 13 instead of 15 on the 8606 correct? (Not the 1040). And then just tell him to ignore the 2a taxable portion listed on my 1099 right? Thanks.
                  Click to expand...


                  Yes.  Line 13 on the 8606 instead of line 15.

                  And yes, 2b being checked means that you use form 8606 to determine whether or not the amount is taxable instead of using 2a on your 1099.

                  Please let me know if you need any more help with this.

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