Schwab does not allow specific tax lots to be selected online when selling mutual funds

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mptfan
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Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

I learned some things about how Schwab handles the request to use tax cost basis method "specific identification of shares" for mutual funds held in brokerage accounts...

1) Schwab defaults to average cost basis for all mutual fund purchases in brokerage accounts. In order to change from this default, you cannot make the change online, you have to submit a form. And the form that you have to fill out to attempt to change your default cost basis method to specific ID of shares does not use the phrase "specific identification of shares" anywhere on the form. According to a rep that I spoke to, you have to select "Tax Lot Optimizer" and then trust that they will change your default to specific ID. I pointed out that the form does not say "specific identification of shares" but was assured that it was the right form and I should trust that the default cost basis will be changed to specific identification of shares even though the form does not say that. So later I checked on the website under Service...Account Settings...Cost Basis Method for Mutual Funds, and it says "Uses Account Default." I pointed this out to the rep on the phone that my account settings do not indicate specific ID as my cost basis method and she agreed that there was no way for me to verify online that my default method was specific ID. So even after you submit the form, you will have no way to verify that your default cost basis method for mutual funds is specific ID.

2) If you want to change your cost basis method for mutual fund purchases to specific identification of shares, as opposed to the default average cost basis, you must make the change and submit the form before you buy the mutual fund. Notice I did not say before you sell...the change is not retroactive, that means for all previously purchased mutual fund lots that were purchased before you submit the form you do not have the option of selecting specific identification of shares when you sell them, they will be sold using the average cost basis whether you want to or not. By submitting the form, the option to use specific ID of shares for mutual funds becomes available only for future mutual fund purchases...not future sales, future purchases. Think about that.

3) Even after submitting the form and changing the cost basis method from the default "average cost basis" to "specific identification of shares" for mutual funds, you still cannot select specific tax lots of mutual fund purchases when you initiate a sale online, you have to call and speak to a broker and tell the broker that you want to identify a specific tax lot. I do not know whether you can get written confirmation that a specific tax lot was sold if you initiate a trade by phone.

Note: Online mutual fund trades are free, whereas broker assisted mutual fund trades incur a $25 service charge.
https://www.schwab.com/pricing

I must say that I am disappointed by these recent revelations about how Schwab handles cost basis reporting for mutual funds in brokerage accounts. Does Vanguard or Fidelity do things differently?
Last edited by mptfan on Wed Jan 23, 2019 5:33 pm, edited 9 times in total.
livesoft
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by livesoft »

In the old days everybody did it that way. The Bogleheads wiki had (has?) a section on writing a Letter of Instruction on how to specifically identify shares to be sold. Only in recent years has the internet allowed the possibility of having a web site that lets one specifically identify shares to be sold.

For non-covered shares, the Vanguard web site has no way to specifically identify shares, so a Letter of Instruction should be used.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

Does Vanguard have a way to identify specific shares to be sold online for covered shares?
hap_ca
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by hap_ca »

mptfan wrote: Wed Jan 23, 2019 12:47 am Does Vanguard have a way to identify specific shares to be sold online for covered shares?
Yes. If you previously selected average cost you can change it to spec id. I bought and held funds for a long time and recently switched to spec id without any issues so I could TLH last year. I never sold prior to that so I'm not sure what happens if you sold some while it was still average cost basis and whether or not you can still switch.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by livesoft »

mptfan wrote: Wed Jan 23, 2019 12:47 am Does Vanguard have a way to identify specific shares to be sold online for covered shares?
Nowadays, definitely yes. This makes tax-loss harvesting easy. A screen capture is shown in this post:
viewtopic.php?p=2718848#p2718848

I don't know about Fidelity, but WellsTrade has very nice SpecID interface (for ETFs and stocks) and TDAmeritrade uses GainsKeeper which also works well.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

livesoft wrote: Wed Jan 23, 2019 1:11 am
mptfan wrote: Wed Jan 23, 2019 12:47 am Does Vanguard have a way to identify specific shares to be sold online for covered shares?
Nowadays, definitely yes. This makes tax-loss harvesting easy. A screen capture is shown in this post:
viewtopic.php?p=2718848#p2718848
Thank you livesoft. I have heard it said many times on this forum that Schwab has a much better website interface than Vanguard, and that Vanguard's website is out of date, but in this case Vanguard's website has much better functionality than Schwab.

Does anyone know if Fidelity has this option on their website? Specifically, does Fidelity allow you to select specific identification of shares of mutual funds online, without submitting a form, and sell specific tax lots of mutual funds online, without calling a broker?
Last edited by mptfan on Wed Jan 23, 2019 7:47 am, edited 2 times in total.
UpperNwGuy
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by UpperNwGuy »

Hmmm... Schwab let me change without submitting a form, but I changed only a couple of weeks after buying my first tax lot.
Topic Author
mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

UpperNwGuy wrote: Wed Jan 23, 2019 7:25 am Hmmm... Schwab let me change without submitting a form, but I changed only a couple of weeks after buying my first tax lot.
Can you verify the change online? You still cannot sell tax lots online without calling a broker.
HomeStretch
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by HomeStretch »

Yes, for a Fidelity brokerage account you can set the Cost Basis method to Specific Identification and identify specific lots when selling. No need to call.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

HomeStretch wrote: Wed Jan 23, 2019 7:40 am Yes, for a Fidelity brokerage account you can set the Cost Basis method to Specific Identification and identify specific lots when selling. No need to call.
Thanks. That means Fidelity and Vanguard are a superior options over Schwab for buying and selling mutual funds in a non-tax advantaged account.
UpperNwGuy
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by UpperNwGuy »

mptfan wrote: Wed Jan 23, 2019 7:47 am
HomeStretch wrote: Wed Jan 23, 2019 7:40 am Yes, for a Fidelity brokerage account you can set the Cost Basis method to Specific Identification and identify specific lots when selling. No need to call.
Thanks. That means Fidelity and Vanguard are a superior options over Schwab for buying and selling mutual funds in a non-tax advantaged account.
Superior options if you prefer to transact online without any human interaction. Otherwise, they're the same. Schwab has the best customer service in my opinion.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by exigent »

mptfan wrote: Wed Jan 23, 2019 7:47 am
HomeStretch wrote: Wed Jan 23, 2019 7:40 am Yes, for a Fidelity brokerage account you can set the Cost Basis method to Specific Identification and identify specific lots when selling. No need to call.
Thanks. That means Fidelity and Vanguard are a superior options over Schwab for buying and selling mutual funds in a non-tax advantaged account.
Can you enter your own basis info for non-covered lots? And then specify those lots online when it comes time to sell?
ninjab
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by ninjab »

Fidelity I called them yesterday to see why all my cost basis was the same for a mutual fund purchased on different days, didn't know you had to specify you wanted the lots treated separately! They walked me through changing it through the website, there were quite a few things to click through so not the easiest to find but there.

I will see today if it updates my holdings, did not update yesterday.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by kaneohe »

mptfan wrote: Wed Jan 23, 2019 12:29 am .................................................................
3) Even after submitting the form and changing the cost basis method from the default "average cost basis" to "specific identification of shares" for mutual funds, you still cannot select specific tax lots of mutual fund purchases when you initiate a sale online, you have to call and speak to a broker and tell the broker that you want to identify a specific tax lot.

.........................................................
Are you sure about this? I believe others here have said that you can do it online. I have no interest in doing this online but it would be surprising to me if Schwab was not able to do this and it would be unfair to them if this story is spread and it was not true.

I recently asked for confirmation of the details of a broker-assisted specific ID sale. I was disappointed in the effort it took to get it but they eventually sent me a statement with a different format from what I usually get and it looked like it had the cost basis detail of a lot of the shares.........like it was meant for self-selection of spec ID but I don't really know if the full function of self spec ID sales is possible.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

kaneohe wrote: Wed Jan 23, 2019 9:12 am
mptfan wrote: Wed Jan 23, 2019 12:29 am .................................................................
3) Even after submitting the form and changing the cost basis method from the default "average cost basis" to "specific identification of shares" for mutual funds, you still cannot select specific tax lots of mutual fund purchases when you initiate a sale online, you have to call and speak to a broker and tell the broker that you want to identify a specific tax lot.

.........................................................
Are you sure about this? I believe others here have said that you can do it online. I have no interest in doing this online but it would be surprising to me if Schwab was not able to do this and it would be unfair to them if this story is spread and it was not true.
I can only tell you my experience. I started the process of selling a fund that I previously purchased in my Schwab brokerage account to confirm that I would be able to select a specific tax lot to sell but the sell screen did not give me the option of selecting a specific tax lot, I could only enter a number of shares, even though there is an option (on another screen, not on the sell screen) of seeing the tax lots. So I chatted with a Schwab rep yesterday online to find out how to select specific tax lots when selling mutual funds in my brokerage account and the rep investigated and did a mock sale and saw the same thing I saw and and then told me that the only way to select a specific tax lot when selling a mutual fund was to call and speak to a broker.

It is suprising to me as well that Schwab does not offer this option, and I can assure you I am not spreading something that is not true based upon my recent interactions with Schwab. Perhaps you are thinking about specific identification of shares for stocks? I *think* that you can select specific tax lots online when selling stocks in a Schwab account.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

ninjab wrote: Wed Jan 23, 2019 9:07 am Fidelity I called them yesterday to see why all my cost basis was the same for a mutual fund purchased on different days, didn't know you had to specify you wanted the lots treated separately!
You are not alone, I did not realize this until recently either. There are lots of articles out there, including on the Bogleheads wiki, about tax loss harvesting and the benefits of using specific identification of shares as your tax cost basis reporting method, but I cannot remember reading in any of those articles to alert the reader that brokerages default to average cost basis and you will not be able to use specific identification of shares unless you first go through the process of making that selection. I assume in most cases you can make the selection after you buy the tax lot but before you sell it, but in the case of Schwab, you have to make the selection before you buy.
Last edited by mptfan on Wed Jan 23, 2019 3:55 pm, edited 1 time in total.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

UpperNwGuy wrote: Wed Jan 23, 2019 7:57 am Superior options if you prefer to transact online without any human interaction. Otherwise, they're the same.
I agree that if you exclude the ways that Vanguard and Fidelity are superior to Schwab, they are the same.
livesoft
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by livesoft »

FWIW, at TDAmeritrade and WellsTrade, one does not specify at order time which lots or shares to sell (except for a simple default idea like LIFO, HIFO, FIFO). But as soon as the trade executes one then specifies the lots that were sold very easily. One has until settlement date to make any changes in one's specifications. I wonder if Schwab is the same way?

Perhaps it is time for another thread with screen captures on how to do this at various brokerages?

As for what the reps tell you over the phone: Someone I have known since they were about 5 years old is fresh out of college this December and got their first job at TDAmeritrade a couple weeks ago. They have never ever had so much as as savings account in their life, much less any investments. Guess what their job is?
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aristotelian
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

I have some old mutual funds held in my Schwab brokerage account and encountered this issue. They do allow you to use Tax Lot Optimizer which will automatically sell shares with losses first. The form you need to fill out is called Letter of Authorization to Change From or To Average Cost Basis Method. You can submit it through secure messaging and it takes a couple days to process.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by HomeStretch »

exigent wrote: Wed Jan 23, 2019 8:16 am
mptfan wrote: Wed Jan 23, 2019 7:47 am
HomeStretch wrote: Wed Jan 23, 2019 7:40 am Yes, for a Fidelity brokerage account you can set the Cost Basis method to Specific Identification and identify specific lots when selling. No need to call.
Thanks. That means Fidelity and Vanguard are a superior options over Schwab for buying and selling mutual funds in a non-tax advantaged account.
Can you enter your own basis info for non-covered lots? And then specify those lots online when it comes time to sell?
My first time replying so hopefully I did this right!

Yes, you can enter online the basis information for non-covered lots that Fidelity doesn’t have the basis for. Yes, you can specify these lots online when you sell. I have done both of these.
Edit: this was for individual stocks.
Last edited by HomeStretch on Wed Jan 23, 2019 10:16 am, edited 1 time in total.
Luckywon
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by Luckywon »

mptfan wrote: Wed Jan 23, 2019 12:29 am I learned some things about how Schwab handles the tax cost basis method "specific identification of shares" for mutual funds held in brokerage accounts...

1) Schwab defaults to average cost basis for all mutual fund purchases in brokerage accounts. In order to change from this default, you cannot make the change online, you have to submit a form.

2) If you want to change your cost basis method for mutual fund purchases to specific identification of shares, as opposed to the default average cost basis, you must make the change and submit the form before you buy the mutual fund. Notice I did not say before you sell...the change is not retroactive, that means for all previously purchased mutual fund lots that were purchased before you submit the form you do not have the option of selecting specific identification of shares when you sell them, they will be sold using the average cost basis whether you want to or not. By submitting the form, the option to use specific ID of shares for mutual funds becomes available only for future mutual fund purchases...not future sales, future purchases. Think about that.

3) Even after submitting the form and changing the cost basis method from the default "average cost basis" to "specific identification of shares" for mutual funds, you still cannot select specific tax lots of mutual fund purchases when you initiate a sale online, you have to call and speak to a broker and tell the broker that you want to identify a specific tax lot.

I must say that I am disappointed by these recent revelations about how Schwab handles cost basis reporting for mutual funds in brokerage accounts. Does Vanguard or Fidelity do things differently?
If you want to sell the lots in a different order than you specified before you purchased, maybe you could transfer the holding to a brokerage that allows you that flexibility, and then sell the lots there? You could possibly get an incentive bonus for transferring the holding, or at least inquire about the receiving brokerage reimbursing transfer fees.
Last edited by Luckywon on Wed Jan 23, 2019 10:09 am, edited 1 time in total.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

aristotelian wrote: Wed Jan 23, 2019 10:01 am I have some old mutual funds held in my Schwab brokerage account and encountered this issue. They do allow you to use Tax Lot Optimizer which will automatically sell shares with losses first. The form you need to fill out is called Letter of Authorization to Change From or To Average Cost Basis Method. You can submit it through secure messaging and it takes a couple days to process.
I already did that.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

Luckywon wrote: Wed Jan 23, 2019 10:07 am If you want to sell the lots in a different order than you specified before you purchased, maybe you could transfer the holding to a brokerage that allows you that flexibility, and then sell the lots there?
It's not that I cannot sell the lots in a certain order, it's that I cannot select tax lots at all online when I sell.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by HomeStretch »

mptfan wrote: Wed Jan 23, 2019 9:48 am
ninjab wrote: Wed Jan 23, 2019 9:07 am Fidelity I called them yesterday to see why all my cost basis was the same for a mutual fund purchased on different days, didn't know you had to specify you wanted the lots treated separately!
You are not alone, I did not realize this until recently either. There are lots of articles out there, including on the Bogleheads wiki, about tax loss harvesting and the benefits of using specific identification of shares as your tax cost basis reporting method, but I cannot remember reading in any of those articles that brokerages default to average cost basis and you will not be able to use specific identification of shares unless you first go through the process of making that selection. I assume in most cases you can make the selection after you buy the tax lot but before you sell it, but in the case of Schwab, you have to make the selection before you buy.
When I set the Cost Basis to “Specific ID” it only applied to shares purchased afterwards. Shares purchased before were still shown at “Average Cost”. I called Fidelity and their cost basis team manually corrected the basis for shares purchased before to reflect the actual, rather than average, purchase cost per lot.

Edit: this was for mutual funds, not individual stocks.
Last edited by HomeStretch on Wed Jan 23, 2019 10:15 am, edited 2 times in total.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

livesoft wrote: Wed Jan 23, 2019 9:54 amAs for what the reps tell you over the phone: Someone I have known since they were about 5 years old is fresh out of college this December and got their first job at TDAmeritrade a couple weeks ago. They have never ever had so much as as savings account in their life, much less any investments. Guess what their job is?
I agree that reps can provide incorrect information. The information that I was given was not over the phone, it was by online chat. I have the impression that communicating with reps by chat is better because they have more time to review the question and get the answer.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

HomeStretch wrote: Wed Jan 23, 2019 10:11 am When I set the Cost Basis to “Specific ID” it only applied to shares purchased afterwards. Shares purchased before were still shown at “Average Cost”. I called Fidelity and their cost basis team manually corrected the basis for shares purchased before to reflect the actual, rather than average, purchase cost per lot.
This is another way that Fidelity is better than Schwab. I was told by a Schwab rep that I cannot use specific ID for mutual fund purchases that were made before I selected specific ID as my cost basis method, and I cannot manually change it after the fact. The change only affects future purchases.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by Luckywon »

mptfan wrote: Wed Jan 23, 2019 10:10 am
Luckywon wrote: Wed Jan 23, 2019 10:07 am If you want to sell the lots in a different order than you specified before you purchased, maybe you could transfer the holding to a brokerage that allows you that flexibility, and then sell the lots there?
It's not that I cannot sell the lots in a certain order, it's that I cannot select tax lots at all online when I sell.
Perhaps if you transferred them to another brokerage you would be able to do so? In my experience, a few days after transfer of the holding to another brokerage, detailed cost basis information is transmitted to the receiving brokerage and I would assume that after that is received you could sell the holding just as though it had been purchased at the receiving brokerage initially.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by boglewill34 »

mptfan wrote: Wed Jan 23, 2019 10:14 am
HomeStretch wrote: Wed Jan 23, 2019 10:11 am When I set the Cost Basis to “Specific ID” it only applied to shares purchased afterwards. Shares purchased before were still shown at “Average Cost”. I called Fidelity and their cost basis team manually corrected the basis for shares purchased before to reflect the actual, rather than average, purchase cost per lot.
This is another way that Fidelity is better than Schwab. I was told by a Schwab rep that I cannot use specific ID for mutual fund purchases that were made before I selected specific ID as my cost basis method, and I cannot manually change it after the fact. The change only affects future purchases.
This is not what is implied within the Schwab website, section on changing cost basis method for mutual funds:
The change to your default method will apply to all mutual fund positions in your account.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

mptfan wrote: Wed Jan 23, 2019 10:08 am
aristotelian wrote: Wed Jan 23, 2019 10:01 am I have some old mutual funds held in my Schwab brokerage account and encountered this issue. They do allow you to use Tax Lot Optimizer which will automatically sell shares with losses first. The form you need to fill out is called Letter of Authorization to Change From or To Average Cost Basis Method. You can submit it through secure messaging and it takes a couple days to process.
I already did that.
So what is the problem?
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by Luckywon »

mptfan wrote: Wed Jan 23, 2019 10:12 am I agree that reps can provide incorrect information. The information that I was given was not over the phone, it was by online chat. I have the impression that communicating with reps by chat is better because they have more time to review the question and get the answer.
I also prefer chat for these reasons, and I like to have a written record of what was told to me. I usually copy the chat and save it in a file in my computer before closing the window.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

boglewill34 wrote: Wed Jan 23, 2019 10:18 am
mptfan wrote: Wed Jan 23, 2019 10:14 am
HomeStretch wrote: Wed Jan 23, 2019 10:11 am When I set the Cost Basis to “Specific ID” it only applied to shares purchased afterwards. Shares purchased before were still shown at “Average Cost”. I called Fidelity and their cost basis team manually corrected the basis for shares purchased before to reflect the actual, rather than average, purchase cost per lot.
This is another way that Fidelity is better than Schwab. I was told by a Schwab rep that I cannot use specific ID for mutual fund purchases that were made before I selected specific ID as my cost basis method, and I cannot manually change it after the fact. The change only affects future purchases.
This is not what is implied within the Schwab website, section on changing cost basis method for mutual funds:
The change to your default method will apply to all mutual fund positions in your account.
I agree. They imply something that is not true.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

aristotelian wrote: Wed Jan 23, 2019 10:19 am
mptfan wrote: Wed Jan 23, 2019 10:08 am
aristotelian wrote: Wed Jan 23, 2019 10:01 am I have some old mutual funds held in my Schwab brokerage account and encountered this issue. They do allow you to use Tax Lot Optimizer which will automatically sell shares with losses first. The form you need to fill out is called Letter of Authorization to Change From or To Average Cost Basis Method. You can submit it through secure messaging and it takes a couple days to process.
I already did that.
So what is the problem?
I identified the problems in my original post in paragraphs 2 and 3.
Last edited by mptfan on Wed Jan 23, 2019 1:32 pm, edited 1 time in total.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by F150HD »

livesoft wrote: Wed Jan 23, 2019 12:43 am In the old days everybody did it that way. The Bogleheads wiki had (has?) a section on writing a Letter of Instruction on how to specifically identify shares to be sold. Only in recent years has the internet allowed the possibility of having a web site that lets one specifically identify shares to be sold.

For non-covered shares, the Vanguard web site has no way to specifically identify shares, so a Letter of Instruction should be used.
Etrade lists (and pretty much always has) every lot purchased and much other good info (purchase price, % inc/dec, estimated profit etc). talking stocks. Guessing so for funds/etfs too
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by F150HD »

mptfan wrote: Wed Jan 23, 2019 12:29 am I learned some things about how Schwab handles the tax cost basis method "specific identification of shares" for mutual funds held in brokerage accounts...

1) Schwab defaults to average cost basis for all mutual fund purchases in brokerage accounts. In order to change from this default, you cannot make the change online, you have to submit a form.

2) If you want to change your cost basis method for mutual fund purchases to specific identification of shares, as opposed to the default average cost basis, you must make the change and submit the form before you buy the mutual fund. Notice I did not say before you sell...the change is not retroactive, that means for all previously purchased mutual fund lots that were purchased before you submit the form you do not have the option of selecting specific identification of shares when you sell them, they will be sold using the average cost basis whether you want to or not. By submitting the form, the option to use specific ID of shares for mutual funds becomes available only for future mutual fund purchases...not future sales, future purchases. Think about that.

3) Even after submitting the form and changing the cost basis method from the default "average cost basis" to "specific identification of shares" for mutual funds, you still cannot select specific tax lots of mutual fund purchases when you initiate a sale online, you have to call and speak to a broker and tell the broker that you want to identify a specific tax lot.

I must say that I am disappointed by these recent revelations about how Schwab handles cost basis reporting for mutual funds in brokerage accounts. Does Vanguard or Fidelity do things differently?
I have referenced this before on this forum as have others. Its a PITA. After a few phone calls last year and the lack of clarity and hassle, I started moving funds away from Schwab. Its a headache.

Of course, you'll get a big picture of someone drinking a cup of coffee or paddle-boarding on their site. Have yet to figure out why.
Not that VGs site is all that great, but, Schwab (to me at least) wasn't a great experience.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

mptfan wrote: Wed Jan 23, 2019 10:49 am
aristotelian wrote: Wed Jan 23, 2019 10:19 am
mptfan wrote: Wed Jan 23, 2019 10:08 am
aristotelian wrote: Wed Jan 23, 2019 10:01 am I have some old mutual funds held in my Schwab brokerage account and encountered this issue. They do allow you to use Tax Lot Optimizer which will automatically sell shares with losses first. The form you need to fill out is called Letter of Authorization to Change From or To Average Cost Basis Method. You can submit it through secure messaging and it takes a couple days to process.
I already did that.
So what is the problem?
I identified the problems in my original post listed as number 2 and 3.
Did you try Tax Lot Optimizer option? I don't see a Spec ID option on the form so we may be talking about different forms.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

aristotelian wrote: Wed Jan 23, 2019 10:55 am Did you try Tax Lot Optimizer option? I don't see a Spec ID option on the form so we may be talking about different forms.
You have identified another issue with Schwab that I failed to mention, and I will amend my original post to include this issue...the form that you have to fill out to change your default cost basis method to specific ID of shares does not use the phrase "specific identification of shares" anywhere on the form. You have to select "Tax Lot Optimizer". Yes, I went through this, and yes I spoke to a rep about this (this was an earlier phone call, a different interaction than the chat) and yes I was told that even though the form does not say "specific identification of shares" it is the right form and I should trust that my default will be changed to specific identification of shares even though the form does not say that.

So that we are talking about the same form... it is a 2 page form and it is called "Letter of Authorization (LOA) to Change From or To Average Cost Basis Method" and section 2 of the form lists the available options, none of which are "specific identification of shares."

So later I checked on the website under Service...Account Settings...Cost Basis for Mutual Funds, and it says "Uses Account Default." I'm not kidding. I just checked again and that is what it says. I pointed this out to the rep on the phone and she agreed that there was no way for me to verify online that my default method was specific ID but assured me that was my new default.
Last edited by mptfan on Wed Jan 23, 2019 11:14 am, edited 2 times in total.
aristotelian
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

mptfan wrote: Wed Jan 23, 2019 11:03 am
aristotelian wrote: Wed Jan 23, 2019 10:55 am Did you try Tax Lot Optimizer option? I don't see a Spec ID option on the form so we may be talking about different forms.
You have identified another issue with Schwab that I failed to mention, and I will amend my original post to include this issue...the form that you have to fill out to change your default cost basis method to specific ID of shares does not use the phrase "specific identification of shares" anywhere on the form. You have to select "Tax Lot Optimizer". Yes, I went through this, and yes I spoke to a rep about this (this was an earlier phone call, a different interaction than the chat) and yes I was told that even though the form does not say "specific identification of shares" it is the right form and I should trust that my default will be changed to specific identification of shares even though the form does not say that.

So later I checked on the website under Service...Account Settings...Cost Basis Method for Mutual Funds, and it says "Uses Account Default." I'm not kidding. I just checked again and that is what it says. I pointed this out to the rep on the phone and she agreed that there was no way for me to verify online that my default method was specific ID.
OK, we are talking about the same thing. However, Tax Lot Optimizer is not Spec ID. It does the same thing but automates it. You will not actually specify the shares, you have to trust Schwab to do it for you.

I just checked and my account shows up the same way ("User Account Default"). That is confusing! However, I can confirm that the Tax Lot Optimizer works.

On 1/2/2019, I sold shares of PIEQX with a reported basis of 11.67/share. On 1/4/2019, I sold shares with a basis of 10.82/share. So, it correctly identified the shares with the higher basis first, and did *not* use Average Cost.

You might want to confirm with another rep, but if you submitted the form I think Tax Lot Optimizer should be working for you.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

aristotelian wrote: Wed Jan 23, 2019 11:13 am OK, we are talking about the same thing. However, Tax Lot Optimizer is not Spec ID. It does the same thing but automates it. You will not actually specify the shares, you have to trust Schwab to do it for you.

I just checked and my account shows up the same way ("User Account Default"). That is confusing! However, I can confirm that the Tax Lot Optimizer works.

On 1/2/2019, I sold shares of PIEQX with a reported basis of 11.67/share. On 1/4/2019, I sold shares with a basis of 10.82/share. So, it correctly identified the shares with the higher basis first, and did *not* use Average Cost.

You might want to confirm with another rep, but if you submitted the form I think Tax Lot Optimizer should be working for you.
You do not understand. I do not want to have "Tax Lot Optimizer" as my default tax cost basis method, and according to the rep, I do not have Tax Lot Optimizer as my default method...I have specific ID as my default cost basis method (according to the rep, I cannot verify this). The issue is that the form does not have specific ID as an option, so you cannot explicitly select it, you have to select something else and trust that Schwab will give you specific ID as an option.

From what I am told, both Vanguard and Fidelity are able to do the following:

1) Explicitly change your default to Specific ID of shares for mutual funds,
2) The choice can be made online, without filling out a form and sending it in,
3) The default cost basis method can be verified online by reviewing your account settings,
4) You can select specific tax lots when selling online without calling a broker.

Based on my recent interactions with Schwab, I have learned that Schwab cannot do any of these four things. I will not be using Schwab for any more taxable investing.
Last edited by mptfan on Wed Jan 23, 2019 11:23 am, edited 2 times in total.
NotWhoYouThink
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by NotWhoYouThink »

Thanks for this post. You've done a good job of listing the gripes I have with Schwab, and for everyone who doubts that it can be this difficult I will vouch for your description exactly. You can't change the default for shares you already have purchased, and you can't see on your online account that your selection has changed even for future shares, and there is no such selection as Specific ID. So now I just need to decide whether to consolidate the Schwab account with my Vanguard account or do something else.


And really without the information I've learned on this site I wouldn't know the difference, but it is surprising the Schwab won't join the rest of us in the 21st century and update their features. All of my shares are covered, so that is not an issue.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

mptfan wrote: Wed Jan 23, 2019 11:16 am
aristotelian wrote: Wed Jan 23, 2019 11:13 am OK, we are talking about the same thing. However, Tax Lot Optimizer is not Spec ID. It does the same thing but automates it. You will not actually specify the shares, you have to trust Schwab to do it for you.

I just checked and my account shows up the same way ("User Account Default"). That is confusing! However, I can confirm that the Tax Lot Optimizer works.

On 1/2/2019, I sold shares of PIEQX with a reported basis of 11.67/share. On 1/4/2019, I sold shares with a basis of 10.82/share. So, it correctly identified the shares with the higher basis first, and did *not* use Average Cost.

You might want to confirm with another rep, but if you submitted the form I think Tax Lot Optimizer should be working for you.
You do not understand. I do not want to have "Tax Lot Optimizer" as my default tax cost basis method, and according to the rep, I do not have Tax Lot Optimizer as my default method...I have specific ID as my default cost basis method. The issue is that the form does not have specific ID as an option, so you cannot select it, you have to select something else and trust that Schwab will give you specific ID as an option.
If you absolutely must have Spec ID, you are probably out of luck. There appears to be no Spec ID option for mutual funds.

You can have Spec ID as your default method for stocks/ETF's (which I do) but that will not give it to you for mutual funds.

The options are Tax Lot Optimizer, FIFO, LIFO, High Cost, and Low Cost. These options should allow you to either maximize gains or minimize gains, depending on what you are trying to do. But yes, if you are wedded to Spec ID and only Spec ID, you may need to go to another brokerage.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by aristotelian »

NotWhoYouThink wrote: Wed Jan 23, 2019 11:19 am Thanks for this post. You've done a good job of listing the gripes I have with Schwab, and for everyone who doubts that it can be this difficult I will vouch for your description exactly. You can't change the default for shares you already have purchased, and you can't see on your online account that your selection has changed even for future shares, and there is no such selection as Specific ID. So now I just need to decide whether to consolidate the Schwab account with my Vanguard account or do something else.


And really without the information I've learned on this site I wouldn't know the difference, but it is surprising the Schwab won't join the rest of us in the 21st century and update their features. All of my shares are covered, so that is not an issue.
I was able to change mine from Average Cost to Tax Lot Optimizer. Spec ID may not be an option though.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

aristotelian wrote: Wed Jan 23, 2019 11:24 am If you absolutely must have Spec ID, you are probably out of luck. There appears to be no Spec ID option for mutual funds.
That is the point, people who want to purchase mutual funds in a brokerage account using specific ID should be aware of this so they know to avoid Schwab.

Having great customer service is wonderful, but it does not make up for this failure.
Last edited by mptfan on Wed Jan 23, 2019 3:58 pm, edited 1 time in total.
kaneohe
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by kaneohe »

mptfan wrote: Wed Jan 23, 2019 11:30 am
aristotelian wrote: Wed Jan 23, 2019 11:24 am If you absolutely must have Spec ID, you are probably out of luck. There appears to be no Spec ID option for mutual funds.
That is the point, people who want to purchase mutual funds in a brokerage account using specific ID should avoid Schwab.

Having great customer service is wonderful, but it does not make up for this failure.
curious why you would want spec ID if you can sell shares with the largest losses (smallest gains) or largest gains(smallest losses.......when would you use it?
clip651
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by clip651 »

kaneohe wrote: Wed Jan 23, 2019 11:45 am
curious why you would want spec ID if you can sell shares with the largest losses (smallest gains) or largest gains(smallest losses.......when would you use it?
Just one example, you might want to pick short term vs long term losses or gains to sell. They are not the same for tax purposes.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by kaneohe »

clip651 wrote: Wed Jan 23, 2019 11:51 am
kaneohe wrote: Wed Jan 23, 2019 11:45 am
curious why you would want spec ID if you can sell shares with the largest losses (smallest gains) or largest gains(smallest losses.......when would you use it?
Just one example, you might want to pick short term vs long term losses or gains to sell. They are not the same for tax purposes.
Good point.....I keep forgetting there are some special deals w/ ST gains........and the balance between gains/losses.
Usually for TLH, it doesn't matter ST/LT loss but there those special situations.
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

clip651 wrote: Wed Jan 23, 2019 11:51 am
kaneohe wrote: Wed Jan 23, 2019 11:45 am
curious why you would want spec ID if you can sell shares with the largest losses (smallest gains) or largest gains(smallest losses.......when would you use it?
Just one example, you might want to pick short term vs long term losses or gains to sell. They are not the same for tax purposes.
Also, in retirement I want to be able to select different tax lots to determine how much capital gains or losses I realize in any given year for tax purposes.
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by kaneohe »

One thing I discovered (and rediscovered today) during my Spec Lot trials w/ Schwab.
Don't talk to the reps who answer or the brokers they transfer you to. Ask to speak to the Cost Basis group....
they seem to know more about the specifics.
boglewill34
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by boglewill34 »

kaneohe wrote: Wed Jan 23, 2019 3:29 pm One thing I discovered (and rediscovered today) during my Spec Lot trials w/ Schwab.
Don't talk to the reps who answer or the brokers they transfer you to. Ask to speak to the Cost Basis group....
they seem to know more about the specifics.
Did you learn anything different than what's in this thread?
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Artsdoctor
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by Artsdoctor »

I'm really surprised Schwab wouldn't offer specific lot ID as an easy option to use online. I've read their cost basis description in really close detail, and their website strongly leads you to believe that it is an option for investors. It doesn't make sense that they would make it so difficult, but if they truly don't offer specific lot ID for mutual fund cost basis calculations, I don't see why anyone would possibly recommend using Schwab for a taxable account if there are mutual funds involved.

https://www.schwab.com/resource-center/ ... cost-basis
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mptfan
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Re: Schwab does not allow specific tax lots to be selected online when selling mutual funds

Post by mptfan »

Artsdoctor, I just read the article you cited in that link, and I agree it is deceptive. Schwab writes...

Identifying shares
How do you identify the specific shares you want to sell? If you’re placing the order by phone, tell your broker which shares you’re selling (for example, “the shares I bought on July 5, 2012, for $11 each”). At Schwab, if you place the order online, you’ll see your cost basis method on the order entry screen. If you select the “specified lots” method, you’ll be able to specifically identify which lots you want to sell.


The bolded part is simply not true for mutual funds based on what I have been told by Schwab reps, you cannot identify specific tax lots if you place a mutual fund sell order online, you have to call and speak to a broker. It's also misleading to the extent it implies you can "select the 'specific lots method'" online. You can't.
Last edited by mptfan on Wed Jan 23, 2019 5:26 pm, edited 1 time in total.
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