Question about re-characterization, haven't filed '21 taxes yet

[browne497]

I previously made a post asking if re-characterizing my $6K 2021 Roth contribution to a traditional contribution would be the right move for me given that in the future when I likely deploy to a tax-exempt location, I can move it back over to Roth when my taxable income is much lower.

Link to previous post: https://forum.mrmoneymustache.com/taxes/2021-roth-ira-contribution-recharacterization-right-move-for-me

Most people seemed to agree that it would be the right move, so I did just that. I've done re-characterizations before but never after the actual tax year that I'm accounting for. For the longest I was expecting a tax document from Vanguard that reflected both a conversion that I made in 2021 while deployed as well as the newly made re-characterization, but I never received one that accounted for the latter transaction. When I sent a message to Vanguard inquiring about this, they said the following...

"Since your recharacterization was completed in 2022, it will be reflected on your 2022 tax forms. We'll report the withdrawal of the recharacterized assets and any attributable earnings or losses on IRS Form 1099-R, which we will issue by the end of January of the year following the recharacterization. We'll report the recharacterization into the receiving IRA on IRS Form 5498, which we will issue by May 31 in the year following the year of the recharacterization."

I get that they're saying I won't be able to account for this until I file my taxes next year, but I don't understand how or why since it's from income collected and contributions made for the 2021 tax year. Really, I'd just like this dumbed down so I can know what to expect next year. I'm assuming I'm clear to file my taxes for 2021 now since I won't be getting a document accounting for the re-characterization until next year.

[terran]

They're not saying you shouldn't account for the recharacterization until you file your taxes next year, they're saying that they won't send the tax form until next year. You don't need a tax form though, you just need to attach a statement, the numbers for which you should be able to find in your account transactions. You should attach a statement something like this:

Taxpayer browne497 contributed $6000 to a Roth IRA on xx/xx/2021 for the 2021 contribution year. On xx/xx/2022 all $6000 of the contribution was recharacterized by transferring $xxxx.xx to a traditional IRA in a trustee-to-trustee transfer. The traditional IRA contribution of $6000 was deducted on form 1040.

[browne497]

Taxpayer browne497 contributed $6000 to a Roth IRA on xx/xx/2021 for the 2021 contribution year. On xx/xx/2022 all $6000 of the contribution was recharacterized by transferring $xxxx.xx to a traditional IRA in a trustee-to-trustee transfer. The traditional IRA contribution of $6000 was deducted on form 1040.

Thank you. Just to be sure, on my statement that reflects that transaction, it shows $6637.12 for the re-characterization. Should I use that number or only $6K when I account for it on my tax filing?

[terran]

 $6637.12 should replace where I put $xxxx.xx in the statement, but $6000 is the deduction you should include on schedule 1 line 20. A recharacterization makes it as if you had originally contributed to the type of the IRA you recharacterized to, so you'll deduct that original $6000 contribution.