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Level 2
June 4, 2019
Question

Turbotax issues on non-qualified dividends

  • June 4, 2019
  • 11 replies
  • 85 views

1099 forms from stock trading contain qualified and non-qualified dividends.

Base on what I understand, these values are not accurate and should not be used since qualified dividend needs to meet a holding period.

1. I don’t see Turbotax ask or give any hint to declare qualified dividend. Turbotax just import all data from broker (give Turbotax username and password, then it log in and auto import). This situation put the users to the risk of violate the holding period.

2. If this is Turbotax limitation, I must manual calculate what items are qualified, what are not. If so, how can I enter these values to Turbotax?

3. The qualified dividends that manual calculate will be different with qualified dividend list in 1099 form from broker. Does it trigger any flag from IRS?

Thank you.



11 replies

Alumni - Champ
June 4, 2019
Of course the instructions for 1099-DIV preparers do instruct the broker to observes all the rules when it comes to what amounts can end up in the "Qualified Dividends" box of the 1099-DIV, and those rules have been in place for many years.   Accordingly, I'd be surprised if you're seeing lots and lots of "classification" errors here.  

What's the name of the broker issuing you the 1099-DIV?  You may want to talk to them and determine if what you're reporting seeing "... these values are not accurate..." is, in fact, the case.
Level 11
June 4, 2019
actually brokers often do not report this correctly.....  I know Fidelity does not and TD does not, I am not normally a ST trader but, I know my ST trades over ex-div dates have been misreported often.  they also do not program for hedges and options that may exist in other accounts..  IRS is not known to look at this area.  It would be insignificant for most other than for larger day traders and options traders as it's just the difference in tax rates.  Another broker misclassification is dividends that should be appropriately interest on cash balance that we are supposed to adjust that IRS also normally ignores.
**I don't work for TT. Just trying to help. All the best. . ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question. **Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
Alumni - Champ
June 4, 2019
Ah... I have no experience here since I've never been been a trader.   Overlooking the "...hedges and options that may exist in other accounts..." is understandable but it seems like the rules based on holding periods would be simple to program.  
Level 11
June 4, 2019
yes it should be as well  as interest classified as dividends....  they would need a simple program and prioritize it, all about capital allocations and the fact that the regulators have never prioritized it for them.
**I don't work for TT. Just trying to help. All the best. . ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question. **Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
Level 11
June 4, 2019
After you enter the dividend, and if it was misreported, In TT after you hit continue, there is an option to check "Some qualified dividends or Section 199A dividends are from securities that didn't meet the required holding period."  After checking this box and hitting continue, you will be able to enter the amount misreported.

A dividend being qualified or not is determined by a basic formula: If the shares are owned for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date, then the dividend is qualified; otherwise it is not.There are more rules:
Another requirement is that the shares be unhedged; that is, there were no puts, calls, or short sales associated with the shares during the holding period.

Mutual funds
All of the following requirements must be met:

The fund must have held the security unhedged for at least 61 days out of the 121-day period that began 60 days before the security’s ex-dividend date. (The ex-dividend date is the date after the dividend has been paid and processed and any new buyers would be eligible for future dividends.)
For certain preferred stock, the security must be held for 91 days out of the 181-day period, beginning 90 days before the ex-dividend date. The amount received by the fund from that dividend-generating security must have been subsequently distributed to you.
You must have held the applicable share of the fund for at least 61 days out of the 121-day period that began 60 days before the fund’s ex-dividend date.
Stock
You must have held those shares of stock unhedged for at least 61 days out of the 121-day period that began 60 days before the ex-dividend date.
For certain preferred stock, the security must be held for 91 days out of the 181-day period beginning 90 days before the ex-dividend date.
**I don't work for TT. Just trying to help. All the best. . ***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question. **Mark the post that answers your question by clicking on "Mark as Best Answer" I am NOT an expert and you should confirm with a tax expert.
Level 2
June 4, 2019
1. Thank you maglib. I didn't enter dividend. I gave Turbotax my username and password to log in to my broker. So Turbotax auto import all data. I didn't see any hint/guideline/check box as you mentioned ("Some qualified dividends or Section 199A dividends are from securities that didn't meet the required holding period.").

2. After finish, I came back to Turbotax many time to looking for any way to enter non-qualified dividend but I couldn't find out any.

3. Look like this is limitation of Turbotax and it need to be upgrade. Turbotax said the user don't need to know any about tax, just follow its guideline to do. If so, for each dividend item, Turbotax should have a form so user can enter data to find out if it is qualify or not. Or Turbotax should have function to auto detect if qualified or not since all data relate to share, buying date, selling date available.