Vanguard cost basis problems

[DavidInMaryland]

Has anyone else had Vanguard fail to capture SpecID cost elections correctly? Did you have luck getting it resolved?

I recently sold a chunk of VTASX as part of rebalancing and getting ready for some big tax payments, but I was really careful to select lots with modest gains. The transaction confirmation that was on-screen when I submitted the trade went through showing the correct lots and SpecID.

But in the subsequent transaction confirmation, and in my online Cost Basis screen, it's showing up as FIFO - which, if not corrected, will mean a huge tax liability this year, since the F in the FIFO was probably 20+ years ago.

I sent Vanguard a "secure message" and so hopefully they'll just be able to fix it, but I was curious if this is a known bug. Fortunately I PDFed and was able to send them the transaction submission showing SpecID and the lots - this is obviously their error. But I'm really glad I noticed and it seems like a serious problem.

(I am wondering if my fatal error was in exchanging funds from a legacy mutual fund account to the settlement account of my brokerage account. I do SpecID exchanges from fund-to-fund all the time without this problem.)

[mkc]

There have been several recent reports of this. Here's another one from this week

Vanguard Weirdness

Definitely get ahold of VG CS and attempt to get it corrected.

[DavidInMaryland]

Thanks. I'll circle back with whatever happens. Really quite scary from a normally trustworthy company where I keep my life savings!

[Sandwich]

Has anyone else had Vanguard fail to capture SpecID cost elections correctly? Did you have luck getting it resolved?

I recently sold a chunk of VTASX as part of rebalancing and getting ready for some big tax payments, but I was really careful to select lots with modest gains. The transaction confirmation that was on-screen when I submitted the trade went through showing the correct lots and SpecID.

But in the subsequent transaction confirmation, and in my online Cost Basis screen, it's showing up as FIFO - which, if not corrected, will mean a huge tax liability this year, since the F in the FIFO was probably 20+ years ago.

I sent Vanguard a "secure message" and so hopefully they'll just be able to fix it, but I was curious if this is a known bug. Fortunately I PDFed and was able to send them the transaction submission showing SpecID and the lots - this is obviously their error. But I'm really glad I noticed and it seems like a serious problem.

(I am wondering if my fatal error was in exchanging funds from a legacy mutual fund account to the settlement account of my brokerage account. I do SpecID exchanges from fund-to-fund all the time without this problem.)

This happened to me with exchanges I made on Friday, March 17th. I had selected lots from 2022 that had capital losses and then when I checked on Saturday, March 18, saw huge gains. Vanguard had older lots listed (including non-covered shares from 10++++ years ago) ... FIFO. I had taken screenshots of my confirmations of SPEC ID lots to exchange and sent a secure message along with the screen shots on March 18.

I phoned Vanguard on Monday, March 20 and explained the situation referring the rep to my secure message. She said she'd create a "ticket" for it and that it might take 5 - 7 business days to fix.

I checked the account the next day and saw that it was fixed and that a confirmation showing the correct cost basis dated March 20th was generated.

Feeling confident that all was resolved, I did another exchange on Thursday, March 23 and when I checked on March 24 the cost basis was correct. So I am hoping that the situation that occurred on March 17 was a one-time fluke.

Good luck with getting your situation resolved.

[DavidInMaryland]

Feeling confident that all was resolved, I did another exchange on Thursday, March 23 and when I checked on March 24 the cost basis was correct. So I am hoping that the situation that occurred on March 17 was a one-time fluke.

Thanks! Here's hoping. My trades were on March 7, FWIW.

Interestingly I made another SpecID trade the same day and it worked fine. One possible difference was that the ones mischaracterized as FIFO were exchanges from a mutual-fund account to my brokerage settlement fund instead of mutual-fund-only to mutual-fund-only.

We shall see!

[tortoise84]

It happened to me when I sold 2 different purchase lots of a stock. The cost basis method was set to SpecID, and I did select the shares I wanted to sell when I entered the order. But the next day when I got the trade confirmation, I saw that it had changed to FIFO to shares with a much lower cost basis. Luckily I caught it, and with stock sales you are able to call and change the cost basis before the T+2 settlement date so that's what I did. But if I didn't catch it until tax time next year, I'd probably be SOL.

There is a warning at the bottom of the trade entry screen that says:

Are you trading this security twice in one day? If you execute multiple trades involving the same security in the same trading day, and you attempt to execute a subsequent trade using specific identification (Spec ID) as the cost basis method, you may be defaulted to first in, first out (FIFO) as your cost basis method. If you have questions or would like to proceed using Spec ID, you must contact us at 800-992-8327 before settlement.

This sort of explains what is happening here, but I didn't think it applied to this trade since I only made one trade, but I guess it could if there are multiple executions of that trade?

[LotsaGray]

It happened to me when I sold 2 different purchase lots of a stock. The cost basis method was set to SpecID, and I did select the shares I wanted to sell when I entered the order. But the next day when I got the trade confirmation, I saw that it had changed to FIFO to shares with a much lower cost basis. Luckily I caught it, and with stock sales you are able to call and change the cost basis before the T+2 settlement date so that's what I did. But if I didn't catch it until tax time next year, I'd probably be SOL.

There is a warning at the bottom of the trade entry screen that says:

Are you trading this security twice in one day? If you execute multiple trades involving the same security in the same trading day, and you attempt to execute a subsequent trade using specific identification (Spec ID) as the cost basis method, you may be defaulted to first in, first out (FIFO) as your cost basis method. If you have questions or would like to proceed using Spec ID, you must contact us at 800-992-8327 before settlement.

This sort of explains what is happening here, but I didn't think it applied to this trade since I only made one trade, but I guess it could if there are multiple executions of that trade?

Execution in multiple trades by VG should not be the same as you doing multiple trades in a a single day.

My recs (after some recent and potentially very costly things at VG) is that you should be as anal as heck, take screen shots, review confirmations, take detail notes when you talk to VG, etc. Even after all of this (but thank goodness it is my nature to be anal on finance things) VG completely hosed my 1099. Luckily since I had everything clearly captured and documented it was all correctable. Though even that was fun given the processes VG uses.

[OverseasBH]

Has anyone else had Vanguard fail to capture SpecID cost elections correctly? Did you have luck getting it resolved?

I recently sold a chunk of VTASX as part of rebalancing and getting ready for some big tax payments, but I was really careful to select lots with modest gains. The transaction confirmation that was on-screen when I submitted the trade went through showing the correct lots and SpecID.

But in the subsequent transaction confirmation, and in my online Cost Basis screen, it's showing up as FIFO - which, if not corrected, will mean a huge tax liability this year, since the F in the FIFO was probably 20+ years ago.

I sent Vanguard a "secure message" and so hopefully they'll just be able to fix it, but I was curious if this is a known bug. Fortunately I PDFed and was able to send them the transaction submission showing SpecID and the lots - this is obviously their error. But I'm really glad I noticed and it seems like a serious problem.

(I am wondering if my fatal error was in exchanging funds from a legacy mutual fund account to the settlement account of my brokerage account. I do SpecID exchanges from fund-to-fund all the time without this problem.)

Same problem. I secure messaged them and over the course of several days and messages, they got it resolved. Now if they could only fix Portfolio Watch....

[DavidInMaryland]

Has anyone else had Vanguard fail to capture SpecID cost elections correctly? Did you have luck getting it resolved?

I recently sold a chunk of VTASX as part of rebalancing and getting ready for some big tax payments, but I was really careful to select lots with modest gains. The transaction confirmation that was on-screen when I submitted the trade went through showing the correct lots and SpecID.

But in the subsequent transaction confirmation, and in my online Cost Basis screen, it's showing up as FIFO - which, if not corrected, will mean a huge tax liability this year, since the F in the FIFO was probably 20+ years ago.

I sent Vanguard a "secure message" and so hopefully they'll just be able to fix it, but I was curious if this is a known bug. Fortunately I PDFed and was able to send them the transaction submission showing SpecID and the lots - this is obviously their error. But I'm really glad I noticed and it seems like a serious problem.

(I am wondering if my fatal error was in exchanging funds from a legacy mutual fund account to the settlement account of my brokerage account. I do SpecID exchanges from fund-to-fund all the time without this problem.)

Just to circle back on this: it took something like a week and a half, but without my ever having to pick up the phone, Vanguard fixed the cost basis info in response to my message. Always check your confirmations, and also keep a PDF of the transaction receipt!

[Scrooge McDuck]

I had cost basis problems recently that were resolved. The sequence of events was:

1) I purchased shares in several lots while the cost basis method was "average cost"
2) I converted from one share class to another
3) I switched to specific ID
4) I transitioned to the brokerage platform

Because I never sold any shares, my various lots each should have had a distinct cost basis reflecting the price at which they were purchased. But due to some error, they all received effectively an average cost basis. It appears that the conversion in share class was treated like a sale.

Vanguard has a cost basis team which can review and fix problems like this. It's worth taking a look at the cost basis of your various lots and seeing if they look sane.

[sherwink]

I have four decades-old worth of Vanguard mutual fund transactions. I keep a running spreadsheet for Vanguards every single account transaction from inception to today. It's much easier electronically to administer today than it was years ago. Many individual stock transactions predate the industry's requirement for reporting transaction purchases, reinvestment and sales results, however, I have the data to back up any IRS compliance audit would want as proof of veracity in my accounting.

[Hiker-Biker]

Just checked my cost basis for several VG muni bonds and there is no data prior to 2021. Anyone else experiencing this issue? I messaged VG and will see if they can explain. I also exported the cost basis for these funds and there was no difference in what I viewed online. They do have my cost basis for individual stocks though.

[nerdinvestor]

This has happened to me repeatedly, over several years. In each case Vanguard took weeks to fix the cost basis issues, told me it was resolved, their system auto-reverted the fix, they took weeks to fix it again, and then the following year at tax season, they sent incorrect 1099-B forms to the IRS which had to be corrected a third time.

I eventually gave up hope of them fixing their systems and moved everything to Fidelity.

[dad2000]

I just checked and I have the same issue with one of my five VG stock index funds.

I don't know how long it's been this way, but it could've been a while because it wasn't a holding where tax-loss harvesting would have been material.

Overall, I've observed enough bugs/anomalies/inconsistencies with Vanguard tech that I don't particularly trust it. At one time, they had all my holdings except for my 401K. But over time I've been favoring other brokerages and they are now a distant 3rd.

[hoping]

When Vanguard went out of the annuity business, I transferred the ones I had there with Vanguard to Fidelity, and I learned it the transfer process that Vanguard did not have a cost basis for one of them, but they never notified me. At my request they obtained the information. I was disappointed in Vanguard because of this, but that is the only problem I've ever had with them, and I've been with them for several decades.

[Clarky]

One question, and it’s Vanguard customer service story time… lol

[bigguy8437]

I just noticed that Vanguard never updated the cost-basis for my grandmothers mutual fund and it was incorrect by about $500K. I messaged my vanguard rep and they told me that i need to contact the prior investment firm myself to get them to provide the correct cost basis info. Is this really my responsibility to contact them, cant vanguard contact them instead? When the in-kind transfer was done both parties were aware of my grandfathers passing and the correct stepped up basis should have been applied. Also, my grandmother holds about $19M at Vanguard as well, so it’s a little disappointing they are trying to get us to contact the old investment firm instead of doing it for us.

[retired@50]

I just noticed that Vanguard never updated the cost-basis for my grandmothers mutual fund and it was incorrect by about $500K. I messaged my vanguard rep and they told me that i need to contact the prior investment firm myself to get them to provide the correct cost basis info. Is this really my responsibility to contact them, cant vanguard contact them instead? When the in-kind transfer was done both parties were aware of my grandfathers passing and the correct stepped up basis should have been applied. Also, my grandmother holds about $19M at Vanguard as well, so it’s a little disappointing they are trying to get us to contact the old investment firm instead of doing it for us.

The stepped up basis needs to be applied by the custodian of record on the date of death. Once corrected, they can transmit that data to Vanguard.

Regards,

[bigguy8437]

I just noticed that Vanguard never updated the cost-basis for my grandmothers mutual fund and it was incorrect by about $500K. I messaged my vanguard rep and they told me that i need to contact the prior investment firm myself to get them to provide the correct cost basis info. Is this really my responsibility to contact them, cant vanguard contact them instead? When the in-kind transfer was done both parties were aware of my grandfathers passing and the correct stepped up basis should have been applied. Also, my grandmother holds about $19M at Vanguard as well, so it’s a little disappointing they are trying to get us to contact the old investment firm instead of doing it for us.

The stepped up basis needs to be applied by the custodian of record on the date of death. Once corrected, they can transmit that data to Vanguard.

Regards,

My question though is it Vanguard’s duty to reach out to the custodian on behalf of the client? Or should the client be taking care of this themselves?

[Chris K Jones]

All of this is very troubling since Vanguard has my life savings too.

I had a similar experience buying VTIAX before Christmas. It showed up as having a cost basis of about 6000 less than the price I purchased it. As a result, there was 6000 or so gain that wasn't real. They fixed it once I pointed it out, but how does this happen?

This does not inspire confidence in Vanguard!!

[retired@50]

I just noticed that Vanguard never updated the cost-basis for my grandmothers mutual fund and it was incorrect by about $500K. I messaged my vanguard rep and they told me that i need to contact the prior investment firm myself to get them to provide the correct cost basis info. Is this really my responsibility to contact them, cant vanguard contact them instead? When the in-kind transfer was done both parties were aware of my grandfathers passing and the correct stepped up basis should have been applied. Also, my grandmother holds about $19M at Vanguard as well, so it’s a little disappointing they are trying to get us to contact the old investment firm instead of doing it for us.

The stepped up basis needs to be applied by the custodian of record on the date of death. Once corrected, they can transmit that data to Vanguard.

Regards,

My question though is it Vanguard’s duty to reach out to the custodian on behalf of the client? Or should the client be taking care of this themselves?

It's not Vanguard's responsibility.

The executor or trustee who was handling the estate of the deceased person should have had this done before transferring the assets away from the custodian of record on the date of death.

Regards,

[LotsaGray]

I just noticed that Vanguard never updated the cost-basis for my grandmothers mutual fund and it was incorrect by about $500K. I messaged my vanguard rep and they told me that i need to contact the prior investment firm myself to get them to provide the correct cost basis info. Is this really my responsibility to contact them, cant vanguard contact them instead? When the in-kind transfer was done both parties were aware of my grandfathers passing and the correct stepped up basis should have been applied. Also, my grandmother holds about $19M at Vanguard as well, so it’s a little disappointing they are trying to get us to contact the old investment firm instead of doing it for us.

Death occurred while A firm held the assets. The basis step up is their responsibility. VG can only use what A says unless you document alternate basis. How you do so with VG I don’t know but VG should not be expected to do A work. You might ask VG if they have a process you can document the basis update and then do so using DOD to calculate this.

On 19M this might be some effort. That is why VG should not be expected to do it. The way discount and low cost firms stay that way is to not take on extra tasks they are not compensated for. Are you paying VG any fees that would be expected to pay for this? If you just have a self directed account there, the answer is no.

No if you were with a firm charging you account fees or had a FP vharging you AUM fees I am certain they would handle for you. That is how business works. Paying for less service means more DIY. You dont get full service from discount provider.

[LotsaGray]

All of this is very troubling since Vanguard has my life savings too.

I had a similar experience buying VTIAX before Christmas. It showed up as having a cost basis of about 6000 less than the price I purchased it. As a result, there was 6000 or so gain that wasn't real. They fixed it once I pointed it out, but how does this happen?

This does not inspire confidence in Vanguard!!

Your situation is not similar. In OP case VG is following the rules and has not made an error. They were to,d the basis is X so that is what they used. The fact the other firm filed to update basis is not VG fault.

In your situation VG made an error. One I can’t easily understand how. I agree you situation causes concern but it does not surprise me. But the two situations are not similar imo.

[bigguy8437]

I figured out the issue. I’m confused when does the step up basis apply 100%? They applied the 50% step up basis when it was passed from my grandparents together to just my grandmother. Whenever the grandmother dies and it gets passed down to the children is that when the 100% step up basis would be applied?

Long story short the 50% step up basis was applied which was causing the confusion on my part because I thought it should’ve been applied to 100%

[Boggalwinner]

I had two Vanguard mutual funds set up for specific ID. I sold some shares in one fund and all of the shares in the other fund on the same day. I checked off the boxes when I placed the sale orders to identify the specific tax lots to be sold. The paper confirmation statement I received reported both trades as FIFO not specific ID. I called Vanguard and the representative said that when all fund shares are sold in one fund the confirmation statement defaults to FIFO even for the other fund which was only partially sold. The representative told me to disregard the confirmation statement for the tax lots. The correct tax lots are shown on Vanguard.com and will be reported correctly on the year end tax statement for the IRS. The more interactions that I have with Vanguard the more that I am disappointed. I would expect Vanguard to be able to issue correct confirmation statements considering all of the billions of dollars of investments they manage.

[retired@50]

... The more interactions that I have with Vanguard the more that I am disappointed...

Move.

Fidelity or Schwab would probably love to have you as a client.

Regards,

[rkhusky]

... The more interactions that I have with Vanguard the more that I am disappointed...

Move.

Fidelity or Schwab would probably love to have you as a client.

Regards,

Probably not the best time to move to Fidelity given the problems they are currently having.

[stan1]

I had two Vanguard mutual funds set up for specific ID. I sold some shares in one fund and all of the shares in the other fund on the same day. I checked off the boxes when I placed the sale orders to identify the specific tax lots to be sold. The paper confirmation statement I received reported both trades as FIFO not specific ID. I called Vanguard and the representative said that when all fund shares are sold in one fund the confirmation statement defaults to FIFO even for the other fund which was only partially sold. The representative told me to disregard the confirmation statement for the tax lots. The correct tax lots are shown on Vanguard.com and will be reported correctly on the year end tax statement for the IRS. The more interactions that I have with Vanguard the more that I am disappointed. I would expect Vanguard to be able to issue correct confirmation statements considering all of the billions of dollars of investments they manage.

Well, at least the rep knew the answer. That's a positive, right?

Hopefully this is all part of what gets fixed once Vanguard moves all of their IT systems to the new platform they've been working on now for about 10 years and have spent over $2B on.

[Boggalwinner]

I received a corrected confirmation statement in the mail from Vanguard which now shows the correct tax lots.