Trade date v settlement date IRS rules

Forum|Forum|3 years ago
March 13, 2023
2 replies
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I implemented a normal distribution from my IRA with Vanguard. The Activity tab shows Trade date of 12/28/22 They also list it as 1/3/23. I called them and they said it's reportable in 2023.

What are the IRS rules for this sale?

Is it a taxable event in 2022 or 2023? Specific IRS guidance is requested.

Do they simply refer to the SEC rules for Form 13F?

In Dec, I believed that I understood the rules for this and now Vanguard is saying it's different.

I have a situation wherein I need the distribution to be in 2022.

TurboTax Basic Windows

MonikaK1

If your brokerage determined that the distribution was made in 2023 and will report it on a 2023 Form 1099-R, and this was meant to be a Required Minimum Distribution for 2022, you will need to report a missed RMD and file Form 5329, either with your 2022 return or separately and include a statement explaining the reason for the missed distribution.

You may be able to get the penalty waived if you missed taking your RMD due to an error by the financial institution. You'll calculate that penalty in Part 9 of Form 5329. To request a waiver, enter “RC” (for reasonable cause) and the amount of shortfall you want to be waived on the dotted line next to Line 54.

The IRS will match Form 1099-R with the information reported on the tax return for the year the form is filed with them.

See this tax tips article for more information about Form 5329. See also the discussion in this thread for options on how to complete and submit the form.

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sonomadanAuthor

Thanks for the rapid response. This was not an RMD. I needed to take out some money and I needed it to be in 2022. This was from a Vanguard, Mutual Fund IRA. I don't have RMDs yet. I'm 70, so the 59 1/2 rule doesn't apply. I'm looking for IRS authoritative guidance that says that when I sent the Sell order, for a normal distribution, that the year the order to sell was made, is the year in which it is taxable, and not the Settlement Date nor the Distribution Date.

The best I've been able to come up with is Securities and Exchange Commission guidance for their Form 13F, but their guidance for that form states it's not for IRAs.

Any help is appreciated.

saisteven

I had the same problem with Vanguard before. Luckily they corrected it for me after I escalated it. The trade date determines the tax year, not the settlement date.

Vanguard's system is unreliable and some of their representatives do not have enough knowledge.

Mike9241

those dates have nothing to do with the RMD. it's the date the funds actually come out of the IRA to you or to any taxable account. for example a taxable account at Vanguard. generally, funds don't transfer until the settlement date or later.

if this was a taxable account and a gain, it would be reportable in 2022 - trade date