### Retroactively reclassified distributions vs estimated tax payments

Posted:

**Tue Dec 17, 2019 7:37 pm**Next year I quite likely will need to make unequal estimated tax payments, followed up by filing 2210-AI to defend my payments. This year it is just a dry run to work out the mechanics. Filling out 2210AI essentially requires a 1099 package through each quarter. Toward that end, I've constructed a spreadsheet that will generate the 1099 and 1099-like data from monthly broker statements and year end numbers published by fund companies. (I suspect I'll be able to fully predict my 1099 before my broker actually produces it.)

One issue without a clear answer is how to handle retroactive reclassification of fund distributions, i.e. when a fund takes from the dividend pile and calls it return of capital, long term gains, or several other possibilities. (In 2018 Vanguard's BND ETF actually took from the LTCG pile and put some back in the dividend pile!) In the spreadsheet, I calculate such reclassifications proportionally across all distribution payments. (For example, if the 1099 form shows a fund with $100 of distributions has $10 of LTCG, then I assume that 10% of each payment is LTCG in whatever months my broker statements show a distribution payment.)

The above generates tax quarter numbers with just monthly broker statements and the end of year 1099. Should I instead download a fund's distribution record once the numbers are changed to reflect reclassifications? For example, currently Vanguard's REIT ETF (VNQ) shows no return of capital for 2019. I assume in January 2020 the numbers will be edited to show the return. Looking at prior years, it seems that Vanguard does the same proportional assignment as my calculations. But BND's LTCG->dividend assignment wasn't proportional. To me it seems that having to access "private" data goes beyond the spirit of form 2210-AI.

One issue without a clear answer is how to handle retroactive reclassification of fund distributions, i.e. when a fund takes from the dividend pile and calls it return of capital, long term gains, or several other possibilities. (In 2018 Vanguard's BND ETF actually took from the LTCG pile and put some back in the dividend pile!) In the spreadsheet, I calculate such reclassifications proportionally across all distribution payments. (For example, if the 1099 form shows a fund with $100 of distributions has $10 of LTCG, then I assume that 10% of each payment is LTCG in whatever months my broker statements show a distribution payment.)

The above generates tax quarter numbers with just monthly broker statements and the end of year 1099. Should I instead download a fund's distribution record once the numbers are changed to reflect reclassifications? For example, currently Vanguard's REIT ETF (VNQ) shows no return of capital for 2019. I assume in January 2020 the numbers will be edited to show the return. Looking at prior years, it seems that Vanguard does the same proportional assignment as my calculations. But BND's LTCG->dividend assignment wasn't proportional. To me it seems that having to access "private" data goes beyond the spirit of form 2210-AI.