Work with Vanguard and get a copy of 1099-R and write politely to irs to explain why you should not pay. if vanguard failed to file, ask vanguard to explain to irs for you.
a lawyer may charge more than the tax amount irs wants from you. lol
Advisor Network
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3/05/2012 @ 12:11AM |4,721 views
Forbes
Roth IRA Recharacterization 2012: Undoing a Roth Conversion
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Since Mr. Typical is paying tax on all three accounts he is letting ride until October, he could file his tax return in April and then file an amended return if he decides to keep only two of them.
How do you execute a Roth recharacterization?
Undoing a Roth conversion is as simple as moving the money from your Roth IRA back to a traditional IRA using your custodian’s forms for a Roth recharacterization. You can also execute a partial recharacterization and move part of the Roth back to a traditional IRA. You can work with your custodian to recharacterize the right percentage of the current account value to realize or keep the right dollar amount of the original conversion. When you recharacterize a Roth IRA back to a traditional IRA, you’ll need to get certain values from your custodian to report the recharacterization correctly on your taxes.
Both a Roth conversion and a recharacterization trigger your custodian to report these decisions on Form 1099-R. The gain or loss on the portion recharacterized allows the IRS to follow how much of the original conversion amount was recharacterized. Complete instructions are found on Form 8606 at irs.gov.
When can you do a new Roth conversion after a recharacterization?
You can’t convert the same money twice in one year. Since Mr. Typical initiated his conversion during 2011, he can reconvert funds in his IRA in 2012 but must wait 31 days after the 2011 recharacterization is executed. If he had $1 million in his traditional IRA, he could have opened an additional five accounts for 2012 without needing to recharacterize and convert the money again from 2011.
What needs to be done before October 15?
Any Roth conversion accounts you want to unconvert must be recharacterized before the late filing deadline. Mr. Typical’s accounts may have flip-flopped. A different account might be worth recharacterizing because it dropped in value. Keeping Roth conversions segregated in separate accounts allows this flexibility.
Because of the increase in tax rates in 2013, I would be quick to recharacterize 2011 Roth conversions and try again in 2012. For a 2012 conversion this time next year, I would want to keep the conversion knowing that if I redo the conversion it would be under the higher rates.
This is the last year that tax rates suggest executing a massive Roth conversion might produce large future tax savings. Don’t miss this chance.
