Excise Taxable Distributions at Year End

[Packman]

I have to work hard to stay below the ACA maximum income limits each year. Some I-Shares ETF's (including IVV) make a final distribution that doesn't hit my brokerage account until the following year, but shows up on the current year tax forms. I spoke to an I-Shares rep and was told that they were required to distribute all dividend income each year and therefore make this final payment with an ex-date of December 30th or 31st. Last year it put me over the income cliff. Fortunately I could make an IRA contribution that lowered my MAGI back under the cliff.

I have never had any other funds/ETF's that make this very late distribution. Has anyone else had this kind of income distribution? And if so, is it only I-Shares that does this?

 

[Animorph]

Yes it has happened to me, but I wasn't able to track down the exact transaction. Quite a few of my ETF's have distributions at the very end of December, as does Wasatch Funds and Amana at times. I've had a few times where I actually got the dividend at Fidelity in the first few days of January the next year. Even a Fidelity bond index fund held at E*Trade whose dividend showed up January 4th. Though E*Trade is a little slow and not Fidelity. I always try to keep an eye on the estimated dividends for December.

Currently, I'm trying to sell these nuisances as I spend down my taxable accounts.

 

[SecondCor521]

My Dad has a Vanguard bond or MM fund that does this. The distribution actually hits about January 3rd or so, but is included for tax purposes on the previous year's 1099. It bit me the first year I was doing the income taxes related to it, but now I know to account for it.

 

[bingybear]

There are quite a few that can distribute real late in December... like dec 28th or so. Some can 2 or maybe 3 distributions in December. They may not distribute that many times as they may not need to distribute each type of distribution.

Look up your funds distribution schedule and that should give you a better grasp on how many distributions you could have.

 

[RunningBum]

Is "Excise" in the title a typo, maybe should be "extra", or is that a term I don't understand in this context?

In any case, yeah, that's a problem. I'd try to get rid of that fund if I was trying to be precise with MAGI for a subsidy. All of my mutual funds seem to do their last dividends around the 20th or 21st, which leaves me a week or so to know just how much I can convert.

The hitch I run into is VTIAX (VG Total Intl) only reports to you what you are getting after foreign taxes are paid. But those foreign taxes count towards your taxable income, and the MAGI, and you don't find out how much that is until the 1099 comes out. Too late to do anything if you don't have earned income to make a tIRA contribution. So I have to estimate the extra foreign taxes, and add a little buffer to make sure I don't get it wrong.

 

[Packman]

Is "Excise" in the title a typo, maybe should be "extra", or is that a term I don't understand in this context?

In any case, yeah, that's a problem. I'd try to get rid of that fund if I was trying to be precise with MAGI for a subsidy. All of my mutual funds seem to do their last dividends around the 20th or 21st, which leaves me a week or so to know just how much I can convert.

The hitch I run into is VTIAX (VG Total Intl) only reports to you what you are getting after foreign taxes are paid. But those foreign taxes count towards your taxable income, and the MAGI, and you don't find out how much that is until the 1099 comes out. Too late to do anything if you don't have earned income to make a tIRA contribution. So I have to estimate the extra foreign taxes, and add a little buffer to make sure I don't get it wrong.

I agree that foreign taxes cause the same issue so I need to plan for them in a similar fashion.

I-shares actually calls this late dividend something with the word excise in it, don't know why.