Spillover dividends and Vanguard tax info. TAX CENTER Warning

[Tipster1947]

WARNING ABOUT TAX CENTER.
I have learned that you can NOT rely on the information on the Vanguard web-page "Quarterly Summary" in the Tax Center. It turns out that dividends from Prime MM and I don't know how many other funds that show dividends on Dec 31 are not reflected in the tax summary until Jan 1 or after. This year they did not appear until Jan 2, BUT did show up in 1099. This created a nasty surprise for me this year, since several hundred dollars in dividends almost cost me over $10,000.00 in ACA subsidy.

Vanguard is now aware of this, but shows no signs of fixing it.

[Silk McCue]

WARNING ABOUT TAX CENTER.
I have learned that you can NOT rely on the information on the Vanguard web-page "Quarterly Summary" in the Tax Center. It turns out that dividends from Prime MM and I don't know how many other funds that show dividends on Dec 31 are not reflected in the tax summary until Jan 1 or after. This year they did not appear until Jan 2, BUT did show up in 1099. This created a nasty surprise for me this year, since several hundred dollars in dividends almost cost me over $10,000.00 in ACA subsidy.

Vanguard is now aware of this, but shows no signs of fixing it.

I don't think there is anything wrong about this. There is a posting process that occurs that will not show up until the next business day. Since the 1st was a holiday they didn't show up until the 2nd. I'm not certain what you could have possibly done on December 31st to avoid bumping into an ACA subsidy anyway and you should have already factored in known recurring dividends for all of your taxable holdings. I certainly did when making my final small Roth Conversion.

Now you know.

Cheers

[grabiner]

There are a lot of other variables in your tax situation which won't be known until January. If your foreign stock fund paid you $5000 in dividends, you might actually have $5400 in income (and $400 in foreign tax credit), but you won't know the number until you receive your 1099.

[livesoft]

I think the OP was trying to do something for the first time in 2018 with respect to not overshooting income and going over the ACA cliff. If they had used the Vanguard tax center in 2017 or earlier, they would have seen all the same issues.

They are now more experienced with income and tax reporting now and probably won't make the same $10,000 mistake again.

But it is good to warn people that things are not as they seem, but I doubt it will do much good. People only want to learn things in a "just in time" way which is often a "just too late" way.

[Tipster1947]

Victim blaming went out a long time ago, "livesoft". I've been using of all sorts of tax law advantages probably as long as you including very aggressive Roth conversions just under the tax bracket ceiling, I've been dealing with the ACA issue since it came out, but till this year, the target was to minimize income, not go to the cliff edge. I just never got bitten in the ass by Prime MM before and the consequences would have been trivial. I usually don't bother with Prime MM so I've never experienced the discrepancy between tax center and 1099-D.

Hey Silk, I totally understand what they did, but I even had gone as far as to call Vanguard Admiral account services in mid December and review, investment by investment, the anticipated dividends to be received by end of year. They certainly didn't mention or probably even know anything about spill over dividends. To add insult, my 2019 tax center now shows dividends, that, for tax purposes, belong in 2018. But in 2019 it won't matter. If I had been given accurate info when I called, I would have taken a few dollars less in RMD and had a bigger cushion.

My gripe is that if you are calling something "Tax center" it should be damn close and put things in the right place for tax purposes, not cash flow. Now you know NOT to trust them on that.

I'm posting this as a warning to others and in the vain hope that someone from the mother-ship will read it and fix it. I've gotten no satisfaction going direct. What I think they need to do is post a warning, educate their staff, and either fix the "Tax Center" or eliminate it.

Now, my question is whether I should I trust their RMD calcs. I won't. I little overshoot won't hurt too much at the middle of the brackets level. At least it's not the '70s

[HueyLD]

I am almost certain that the OP has the new brokerage accounts because VMMXX in my “mutual funds only” accounts reported and paid December dividends in 2018.

[retiringwhen]

WARNING ABOUT TAX CENTER.
I have learned that you can NOT rely on the information on the Vanguard web-page "Quarterly Summary" in the Tax Center. It turns out that dividends from Prime MM and I don't know how many other funds that show dividends on Dec 31 are not reflected in the tax summary until Jan 1 or after. This year they did not appear until Jan 2, BUT did show up in 1099. This created a nasty surprise for me this year, since several hundred dollars in dividends almost cost me over $10,000.00 in ACA subsidy.

Vanguard is now aware of this, but shows no signs of fixing it.

Just so I understand what you are saying, If I go to my 2018 quarterly summary today (FEB 11) it will correctly show the 4th quarter dividend summary for all of my mutual funds as long as they were declared payable in 2018, regardless of the date that they were deposited into my account? But the values are only reflected in the summary once they are posted to the account, not when they were declared?

But there were pending dividends on the December 31st, January 1st and probably the 2nd that were not posted and visible on those days?

[fru-gal]

I update my account balances in my offline spreadsheet every month, but I do it on the 1st or 2nd of the following month. It seems quite common for balances to be adjusted overnight between the last day of the month and the 1st day of the next month. Vanguard is not unique in this and it actually seems quite logical to me.

I guess you might have a case if you logged in at 11:59pm on the last day of the month. Well, not really, overnight updates are so common.

[UpperNwGuy]

I have four Vanguard funds that posted December 2018 dividends on January 2. The 1099-DIV correctly shows them as 2018 income. The December 2018 statement does not include those four dividend payments, so the year to date totals on the statement are wrong. The January 2019 statement does include them, as if they were 2019 income, so it is wrong too. I wish Vanguard would adopt a more consistent approach to their reporting. (And yes, this is a brokerage account.)

[HueyLD]

I have four Vanguard funds that posted December 2018 dividends on January 2. The 1099-DIV correctly shows them as 2018 income. The December 2018 statement does not include those four dividend payments, so the year to date totals on the statement are wrong. The January 2019 statement does include them, as if they were 2019 income, so it is wrong too. I wish Vanguard would adopt a more consistent approach to their reporting. (And yes, this is a brokerage account.)

Yes, Vanguard has serious problems with their IT and accounting system.

My non-Vanguard brokerage accounts paid and reported all EOM payments correctly. There is not any excuse for Vanguard to screw up the most basic 101 of investment recordkeeping.

The poor IT and accounting at Vanguard has definitely helped its competitors to retain and recruit customers.

[drzzzzz]

I would also encourage you to look at their 1099 forms closely. We had dividends that were suppose to go to our settlement account, but instead Vanguard reinvested the dividends into the mutual fund. They reversed the transaction, but counted the dividends twice on the 1099 on the original date that they were received and then again on the date when they were reversed and went correctly into the settlement account. A little disconcerting that they can't get simple things correct.

[retiringwhen]

As an FYI, the following disclaimer is at the bottom of the Tax Center page:

Note: The information on this page may be based on estimates and shouldn't be used for tax-reporting purposes. Refer to your Vanguard tax forms for final reportable income.

Secondly, I believe there is some serious confusion in this thread about the accounting of dividends in this account.

There are three dates for dividends for ALL mutual funds.

1.) Declaration Date (this is the date that defines what year a dividend is taxable.)
2.) Reinvestment Date (if you have auto reinvestment, this the date that the dividend is posted and recorded in your account.)
3.) Payable Date (the date a dividend is posted to your account if it is not reinvested, or is distributed externally)

The Tax Center, correctly as far as I can tell, assigns all dividends to their correct tax year.

The Tax Center correctly records the dividend's accrual as per the rules you have assigned to the handling of the dividend. It does not predict the future, but it correctly reflects that past.

The transaction history (instruction errors not-withstanding) reflects the date or each dividend as per the rules above.

For example, VBTLX had a declaration date of 12/31/18, a reinvestment date of 12/31/18 and a payable date of 1/2/19. that is all correctly handled in my account that had a non-reinvested dividend.

The key here is to understand that Dividends have 3 dates related to them and there are nuances that can have consequences, especially at the end of the year.....

I have dividends for stock funds, bonds funds and money markets that are both reinvested and payable to settlement accounts (IOW, my accounts have representative sample of all reasonable cases except dividends being paid to an external account)

The other concern is that Vanguard does not have "up-to-date" balances until very near the opening of the next trading/business day, with the exception that most Saturday's things are good as they would be for Monday. Any balances, transaction history, etc. is not complete between 4pm at close until somewhere near 9AM the next morning.

I don't have a current brokerage anywhere else these days to compare, but my credit union, bank, and credit card providers cannot be considered anymore timely than that. In fact my credit union is bizarre because they sometimes post items in the future, but make them look like today and that messes up my account tracking horribly if I am not watching for it.

[LadyGeek]

This thread is now in the Personal Finance (Not Investing) forum (taxes). I modified the capitalization on the thread title.

[Tipster1947]

As an FYI, the following disclaimer is at the bottom of the Tax Center page:

Note: The information on this page may be based on estimates and shouldn't be used for tax-reporting purposes. Refer to your Vanguard tax forms for final reportable income.

Secondly, I believe there is some serious confusion in this thread about the accounting of dividends in this account.

There are three dates for dividends for ALL mutual funds.

1.) Declaration Date (this is the date that defines what year a dividend is taxable.)
2.) Reinvestment Date (if you have auto reinvestment, this the date that the dividend is posted and recorded in your account.)
3.) Payable Date (the date a dividend is posted to your account if it is not reinvested, or is distributed externally)

The Tax Center, correctly as far as I can tell, assigns all dividends to their correct tax year.

The Tax Center correctly records the dividend's accrual as per the rules you have assigned to the handling of the dividend. It does not predict the future, but it correctly reflects that past.

The transaction history (instruction errors not-withstanding) reflects the date or each dividend as per the rules above.

For example, VBTLX had a declaration date of 12/31/18, a reinvestment date of 12/31/18 and a payable date of 1/2/19. that is all correctly handled in my account that had a non-reinvested dividend.

The key here is to understand that Dividends have 3 dates related to them and there are nuances that can have consequences, especially at the end of the year.....

I have dividends for stock funds, bonds funds and money markets that are both reinvested and payable to settlement accounts (IOW, my accounts have representative sample of all reasonable cases except dividends being paid to an external account)

The other concern is that Vanguard does not have "up-to-date" balances until very near the opening of the next trading/business day, with the exception that most Saturday's things are good as they would be for Monday. Any balances, transaction history, etc. is not complete between 4pm at close until somewhere near 9AM the next morning.

I don't have a current brokerage anywhere else these days to compare, but my credit union, bank, and credit card providers cannot be considered anymore timely than that. In fact my credit union is bizarre because they sometimes post items in the future, but make them look like today and that messes up my account tracking horribly if I am not watching for it.

Sorry so say, you re incorrect. Tax center does NOT assign dividends to correct year. If you have Prime MM compare your tax center summary End of 2018 with your 1099. Then compare your statement from Dec 31 to Jan 31 statement and you'll see the same thing. Dividend "declared" for 12/31 does not appear until 1/2. I haven't checked t see if they do the same with other funds that pay dividends, but I imagine many do on Dec 31.



The disclaimer, which I didn't notice, gives them wiggle room, but Discoverbank has no problem with this. They pay interest on the 31st and actually pay it.

Basically, Vanguard is hanging onto your money and riding the float for a day or more every month.

Food for thought: If they calculate your RMD based on THEIR statement and THEIR record of your account, you'll be under-withdrawn if they decide to add dividends after the fact.

[Tipster1947]

I have four Vanguard funds that posted December 2018 dividends on January 2. The 1099-DIV correctly shows them as 2018 income. The December 2018 statement does not include those four dividend payments, so the year to date totals on the statement are wrong. The January 2019 statement does include them, as if they were 2019 income, so it is wrong too. I wish Vanguard would adopt a more consistent approach to their reporting. (And yes, this is a brokerage account.)

YOU GOT IT! See my other posts. Banks don't do this. Vanguard is riding the float. I've been telling this to my Acct rep. He promises to investigate. I requested a revised 1099. Of course they refused.

I wound up $64.00 away from am $11,000.00 ACA subsidy cliff - too close for comfort.

If you don't mind, tell your account rep, too. It's not right.

And, as mentioned before, Do you trust RMD calcs?

[Tipster1947]

I have four Vanguard funds that posted December 2018 dividends on January 2. The 1099-DIV correctly shows them as 2018 income. The December 2018 statement does not include those four dividend payments, so the year to date totals on the statement are wrong. The January 2019 statement does include them, as if they were 2019 income, so it is wrong too. I wish Vanguard would adopt a more consistent approach to their reporting. (And yes, this is a brokerage account.)

Yes, Vanguard has serious problems with their IT and accounting system.

My non-Vanguard brokerage accounts paid and reported all EOM payments correctly. There is not any excuse for Vanguard to screw up the most basic 101 of investment recordkeeping.

The poor IT and accounting at Vanguard has definitely helped its competitors to retain and recruit customers.

Please notify your account rep. Over and over.

[retiringwhen]

Sorry so say, you re incorrect. Tax center does NOT assign dividends to correct year. If you have Prime MM compare your tax center summary End of 2018 with your 1099. Then compare your statement from Dec 31 to Jan 31 statement and you'll see the same thing. Dividend "declared" for 12/31 does not appear until 1/2. I haven't checked t see if they do the same with other funds that pay dividends, but I imagine many do on Dec 31.

I stand corrected, you are right. I see the error now in the Tax Center report. Good thing I don't use that for anything serious. I see the error in one of my taxable accounts that holds both VBTLX and VMMX. The Tax Center shows their 1/2/19 payments as 2019 dividends, not 2018, the 1099 is correct (includes those 1/2/19 dividends as 2018 income). The transaction history is correct as to the actual activity.

Of course, related to your RMD, I don't know the rule here, but the RMD is calculated on the account balance on 12/31. I believe the dividends paid out in the next year are not in the balance for that date, so there is no problem with the RMD. the 1099 year is based on an IRS rule that says any dividend or interest payment declared in the previous year, but paid in then next is required to be reported in the prior year. I don't see how that applies to RMDs.

[retiringwhen]

Basically, Vanguard is hanging onto your money and riding the float for a day or more every month.

Only if you don't do automatic reinvestment. if you do auto-reinvestment, the dividend is credited to the account on the date of declaration. I have VMMX set both ways between different accounts.

Is there any brokerage out there that does NOT make payable dates at least one day later than the dividend declaration date? I honestly don't know the answer to the question. Every single fund in Vanguard works that way including all of their ETFs.

[UpperNwGuy]

Basically, Vanguard is hanging onto your money and riding the float for a day or more every month.

Only if you don't do automatic reinvestment. if you do auto-reinvestment, the dividend is credited to the account on the date of declaration. I have VMMX set both ways between different accounts.

Is there any brokerage out there that does NOT make payable dates at least one day later than the dividend declaration date? I honestly don't know the answer to the question. Every single fund in Vanguard works that way including all of their ETFs.

Hmm... I have never done auto reinvestment on any of my Vanguard funds, so I didn't realize that those dividends posted a day sooner than the dividends paid into the settlement fund.

[Tipster1947]

Basically, Vanguard is hanging onto your money and riding the float for a day or more every month.

Only if you don't do automatic reinvestment. if you do auto-reinvestment, the dividend is credited to the account on the date of declaration. I have VMMX set both ways between different accounts.

Is there any brokerage out there that does NOT make payable dates at least one day later than the dividend declaration date? I honestly don't know the answer to the question. Every single fund in Vanguard works that way including all of their ETFs.

I don't see how auto reinvesting affects it. In my taxable account Prime MM (VMMXX) declares dividend on the 31st, but doesn't "deposit" it until the 1st of next month. It's always in next month, and sometimes quarter and year. Look at your statements for VMMXX deposits on the 1st or 2nd of the month. Vanguard "Tax Center" calls receipt on the 1st on that page, but on the 31st for 1099, which is my complaint.

OTOH, Fed MM VMFXX recognizes credit and deposits it the same day - the 31st. So they can do it if they want to.