VG reported it as an early distribution - why?

[Carpediem]

While doing my taxes yesterday, I noticed that Vanguard reported that a dividend I received was marked as an early distribution subject to the 10% penalty. My 59th birthday was the first part of December 2017 and the dividend was received in the latter part of June 2018. Why would it be considered an early distribution if I was 59.5 years old plus approx 20 days? Is this simply a mistake on VG's part and if so, do I call them to correct it and send me a new tax form?

 

[zinger1457]

I believe the date for tax purposes is when the dividend is declared, not when it's paid, I'm guessing the declared date was just before you reached 59.5. Did you request to have the dividends paid out or should they have been reinvested?

 

[RunningBum]

I would just call Vanguard and ask. You haven't even told us exactly what kind of account this is, and with vague dates such as "early" and "late" in the month, talk of dividend which really isn't the same as a distribution, I wouldn't hazard a guess.

 

[Carpediem]

I would just call Vanguard and ask. You haven't even told us exactly what kind of account this is, and with vague dates such as "early" and "late" in the month, talk of dividend which really isn't the same as a distribution, I wouldn't hazard a guess.

The account in question is a rollover IRA. I've had the account for years and years. My bday is Dec 1 and the dividend paid out on or around June 20.

I called VG and I was on hold for around 30 minutes while they researched the issue. I was finally passed off to a 'Resolution Specialist'. He confirmed their system didn't recognize my age was 59.5 at the time the dividend paid out and it needs to be corrected. They are making the change to the 1099-R in their system and it will be available in 4-5 business days. I asked if the IRS will receive a corrected form as well and obviously he said they would.

I sure am glad I caught this before I submitted my tax return. And it sure is very disconcerting to see such a basic age calculation get screwed up in a huge megacorp's system such as Vanguard.

 

[RunningBum]

Glad it's getting resolved. I'm surprised and disturbed they blew it too. Good catch, as this is the kind of thing that can be missed when you just let tax programs import data and don't really take a good look at it. It's a pain you had to wait on hold so long but that was going to happen anyway unless the group here could come up with some answer, which wasn't likely especially with very little info.

What I would've done is contacted my Flagship rep and let him track down the expert and set up a time to call me so I didn't have the wait. If you aren't flagship, I don't know if you have any similar option, but in general my way to handle a complicated problem is to start it by email or message and let them get it to the right person without me having to wait.