Reporting non-dividend distribution on 1099-DIV

[meierlde]

Quote:

Originally Posted by cathy63 The IRS doesn't care about returns of capital until you actually sell the asset and Vanguard has already told you that when you do sell the asset in some future year, then they will report the adjusted basis to the IRS and to you on a 1099-B. The number in box 3 of a 1099-DIV is just for your own information right now.

Except when your basis gets to zero and then the IRS does want the distribution reported as a capital gain (long or short term)

[Horseback]

I have exactly the same question dvalley had.
So can I just not report the amount on Taxact form?
Could dvalley let me know what you finally did?
Thanks.

[meierlde]

I had Frontier communications do this last year and adjusted the basis as appropriate. (If you bought the stock in question since the time brokers are required to report the basis, they should do it for you that is stocks purchased 2010 or later)

[bingybear]

Quote:

Originally Posted by gerntz Sounds like there's some Master Limited Partnerships in fund to me.

The OP noted info from VG on VGSLX which was noted as REITs. REITs will distribute ROC.

If your 1099 has something in box 3, then you need to input that value in box 3 of the tax code. That will likely be a flag to the IRS by not coping data properly.
If you look at VG basis now it likely has the ROC subtracted already. I think the only way the basis really effects you taxes is if the ROC makes your basis go below 0. In this case I think it will generate a different form on income (CG?).

If you look at the detailed part of the 1099 statement (the stuff that is not reported to the IRS and likely says "for information only" .. you should see what investments generated the Non taxable dividends. This will tell you where to look for a basis.

I dropped taxact this year (paid for it, but moved to Turbotax) so I can't easily check your issue. I bet it is an input that will not be used if the resulting basis is positive. You could just check by playing with the values to see what actually changes. One of the biggest problems with people using tax programs... many don't understand how what they do effects the overall taxes.

A little ROC does not have to be a scary thing.. especially if the brokerage keeps track of the basis.

[dvalley]

Quote:

Originally Posted by Horseback I have exactly the same question dvalley had. So can I just not report the amount on Taxact form? Could dvalley let me know what you finally did? Thanks.

I didn't report it since my interpretation was that box 3 is for my own information purposes only. When the basis go to 0 or the if I sell the shares is when IRS cares neither is the case here. I filed yesterday so we shall see what happens.

[dvalley]

Quote:

Originally Posted by bingybear The OP noted info from VG on VGSLX which was noted as REITs. REITs will distribute ROC. If your 1099 has something in box 3, then you need to input that value in box 3 of the tax code. That will likely be a flag to the IRS by not coping data properly.

From what I gathered box 3 is not reported to the IRS.

[bingybear]

Quote:

Originally Posted by dvalley From what I gathered box 3 is not reported to the IRS.

When I look at my 1099-DIV I have a number in box 3 of one of them. It does not day on my 1099-DIV that this data is for information is for information purposes or not reported to the IRS on the 1099-DIV. Other pages that describe more about the details do say things about this data not reported to the IRA. But most of the document says that too. That does not mean I can not report box 1 too.

Now if your 1099-DIV specifically says that box 3 is not reported to the IRS on on the 1099-DIV itself, then I would agree with you. Mine does not say that on the 1099-DIV form.

[dvalley]

Ultimately here's what Vanguard said (after multiple back and forths of useless chatter)

If you refer to page 2 of your tax forms, the 2016 Form 1099-DIV
Instructions for Recipient, you will find this description of Box 3:

The non-dividend distributions (Box 3) on your 1099-DIV show the part of
the distribution that is nontaxable because it is a return of your cost (or
other basis). You must reduce your cost (or other basis) by this amount for
figuring gain or loss when you sell your stock. But if you get back all
your cost (or other basis), report future distributions as capital gains.
Refer to IRS Publication 550 for more information.

You may view your cost basis information online by following the steps
below:

1. Log on to your account.
2. From the "My Accounts" dropdown, select "Cost basis."
3. Choose the appropriate account.
4. Select the "Unrealized gains & losses,” "Realized gains & losses,” or
"Gifted shares” tab as desired.

Select the "Show details" link under each security to expand the
information by share lot acquired, if available.

Please remember when shares listed on the cost basis page are reflected as
"covered shares," we will report cost basis to the IRS. You are responsible
for reporting cost basis on both "covered shares” and "noncovered shares"
in nonretirement accounts to the IRS. Cost basis reporting is not necessary
for shares in a retirement account.

The last bolded text I presume is for when you sell or the cost basis are 0.

Also, the person who answered below isn't the authority or anything but another datapoint on TTax's site:

https://ttlc.intuit.com/questions/28...ome-tax-return

Edit: another sighting:

http://www.asktaxguru.com/7762-non-d...tribution.html post number 2:

Since 1998 the IRS does not ask you to report these distributions at all. (Before that, you had to report them as part of your dividends and then subtract them so they would be nontaxable.) So the only time you have to report anything from a nondividend distribution is when the amount exceeds your basis in the shares. If an return of capital distribution exceeds a shareholder's cost basis of the underlying stock, then any additional amount is treated as a capital gain.

Lastly, I also looked at my completed 1040 form itself and the various schedules, couldn't find any place for non-div cost-basis reporting. A quick test would be for someone to actually report it on the tax software and see if it shows up anywhere on the completed forms.

[Horseback]

Thanks everyone...TaxAct people say that I have to enter in Box 3 what I see in 1099-DIV. But the Vanguard people are not very helpful in telling me how to find out the cost basis.
I will see if I can figure out the cost basis following what dvalley wrote here and I will enter it.

[dvalley]

When you enter it let us know if that amount shows up on any of the forms because I don't believe it gets reported to the IRS unless it's a capital gain.

[Horseback]

I tried two things.
First I entered the cost basis 0 and checked what happens. My capital gains got increased.
Next I entered the cost basis from Vanguard site. My capital gains remained the same and the cost basis does not show up anywhere.
So your interpretation seems to be correct.
One more thing....the current information on VG gives the cost basis for beginning of the first quarter 2017. So I got the cost from the first quarter 2016 from past statement.

[bingybear]

Quote:

Originally Posted by Horseback I tried two things. First I entered the cost basis 0 and checked what happens. My capital gains got increased. Next I entered the cost basis from Vanguard site. My capital gains remained the same and the cost basis does not show up anywhere. So your interpretation seems to be correct. One more thing....the current information on VG gives the cost basis for beginning of the first quarter 2017. So I got the cost from the first quarter 2016 from past statement.

That sounds like I understand it. In the past I owned individual REITs which often distribute ROC - non-taxable dividends. My brokerage did keep track of the basis and I double checked them. ROC like normal dividends are paid on a per share basis based on the date of distribution. If one has different basis for different shares, it can cause some to hit the negative basis while others still have positive basis. The two brokerages I use both track basis by lot (effectively share - including fractional). I would assume VG would do the same.

I don't know if ROC calculations can be used on average basis or not. But I have not looked either.

[Horseback]

Just now I got this reply from TaxAct.

"If the brokerage is tracking the cost basis, you can enter the amount of the distribution as the cost basis. This will indicate to the program that there is no capital gain to report on the distribution."

[dvalley]

Quote:

Originally Posted by Horseback I tried two things. First I entered the cost basis 0 and checked what happens. My capital gains got increased. Next I entered the cost basis from Vanguard site. My capital gains remained the same and the cost basis does not show up anywhere. So your interpretation seems to be correct. One more thing....the current information on VG gives the cost basis for beginning of the first quarter 2017. So I got the cost from the first quarter 2016 from past statement.

Great, thanks for confirming that unless you sell or when cost basis go to 0 the numbers never get reported to the IRS. They only care about the taxable amounts. It's just the software trying to make sure the cost basis haven't gone to 0 in which case they it will report the divs as capital gains.

Quote:

Originally Posted by Horseback Just now I got this reply from TaxAct. "If the brokerage is tracking the cost basis, you can enter the amount of the distribution as the cost basis. This will indicate to the program that there is no capital gain to report on the distribution."

Ha! so basically fudge the numbers to quell the software logic