This has been going on since the horrific transition to EWC+. My mutual funds don't often throw off Short Term Gains, but when they do, they are incorrectly categorized as Dividends. Long Term Capital Gains transactions download correctly.
Hello @ChrisP.,
Thank you for letting us know you're seeing this issue. To help determine if this is caused by the way the data is being sent to Quicken or by something happening after Quicken receives the data, please navigate to Help>Report a Problem and send a problem report with log files attached.
Please include the names and symbols of the affected mutual funds, the date(s) of the most recent transactions that were downloaded incorrectly, and the $ amount of those transactions.
Please post to let me know once the problem report is sent.
I look forward to your reply!
I manually change DIV to CGShrt whenever they download from Fidelity. Quicken hasn't been treating CGshort correctly since the EWC+ change. Tax wise it could make difference for tax-exempt securities.
Hello @leishirsute,
Thank you for sharing that you're also seeing this and how you manually correct it. Have you contacted Quicken Support directly about this issue?
Thank you!
Not to hijack this thread, but Vanguard has the same problem, where long and short term capital gain distributions are downloaded as dividends. See this discussion
As noted, this is beyond Fidelity; I, too, have seen it from Vanguard more recently via Direct Connect downloads.
As I believe all STCG as MF distributions are taxed as non-qualified dividends, I am not sure there is real or meaningful significance to the ‘error’.
I take the position that Quicken should not ‘fix’ the error. They should take what the FI sends with priority to the FI provided action over the FI provided memo. The FI should fix the problem.
In the case of Fidelity, the income is shown as Short Term Capital Gain in the Fidelity website Activity screen. That usually matches how it is sent to Quicken but that's just a guess on my part. STCG reported as Div for tax exempt MF's will incorrectly be reported in the Tax Planner which could be meaningful if using the Tax Planner for estimated taxes.
I don't think I've reported the issue because the capital gains transactions are not frequent. I'll report it next time it occurs.
STCG reported as Div for tax exempt MF's will incorrectly be reported in the Tax Planner
That is the part that I disagree with, but will not swear to.
STCG will still be subject to income tax and tax-exempt DIV is not. Same with LTCG for a tax-exempt security.
The tax rates for dividends and short term capital gain [adding - distributions] for a taxable security may be the same, but the rules are different, so it is important to keep them separate.
The rules are complicated, see this IRS summary https://www.irs.gov/taxtopics/tc409
[update] I stand corrected, it appears that short term capital gain distributions from mutual funds are taxed the same as ordinary dividends. The instructions for Sched D say the following:
Capital Gain Distributions
These distributions are paid by a mutual fund (or other regulated investment company) or real estate investment trust from its net realized long-term capital gains. Distributions of net realized short-term capital gains aren’t treated as capital gains. Instead, they are included on Form 1099-DIV as ordinary dividends.
Enter on Schedule D, line 13, the total capital gain distributions paid to you during the year, regardless of how long you held your investment. This amount is shown in box 2a of Form 1099-DIV.
Also for funds that have been marked Tax Exempt in Quicken, if STCG distributions are recorded as dividends, Quicken will convert them to _DivIncTaxFree, which is not included in the Dividend numbers in the Tax Planner.
And when Quicken supports identifying a security as generating Qualified dividends (hopefully in R68), if the STCG distributions are recorded in Quicken as dividends, they will be added to the Qualified line in the Tax Planner, which would be wrong.
So at least in those cases I think it is important to record any short term capital gain distributions correctly.
See this from American Funds https://www.americancentury.com/insights/municipal-bonds-tax-time-considerations/
I edited the title of the OP to add "dsitributions"
The tax rates for dividends and short term capital gains for a taxable security may be the same, but the rules are different, so it is important to keep them separate. The rules are complicated, see this IRS summary
The tax rates for dividends and short term capital gains for a taxable security may be the same, but the rules are different, so it is important to keep them separate.
The rules are complicated, see this IRS summary
This discussion is not about general ST capital gains which I agree can get somewhat complicated. It is about ST capital gain distributions from mutual funds.
The 1099-B forms that I get include the STCG distributions from mutual funds in the Total ordinary dividend line (Box 1a). I don't have a way to check immediately if they get included in the Qualified dividend line (Box 1b), but I doubt that they do. There is no separate line for ST capital gains reported on form 1099-B. The Box 2a line is for LT capital gain distributions which flows to Schedule D line 13. There is no comparable Schedule D line in Part I for short term transactions.
Within Quicken, the default tax line for category _ST CapGnDist is Schedule B Dividend income. That is wholly correct as far as I have seen. That is the same tax line assignment for category _DivInc. Thus there is no difference in how transaction categorized as _DivInc versus _ST CapGnDist are treated. I am looking at tax reports rather than the tax planner, but I would not expect the tax planner to screw that up.
Regarding the concern @leishirsute raised about tax-exempt mutual funds, I have not faced that issue. The logic I would offer is that for such securities, it is the income generated by the securities held by the MF that is tax exempt; not the capital gains that the MF develops in buying and selling those tax-exempt securities. The ST and LT cap gains the MF develops in trading the tax-exempt securities are (I expect) no more tax exempt than if you and I were trading those securities. Further to that consideration, I have had situations where a 'tax-exempt' MF has identified a small part of their overall dividend payments through the year as taxable.
@q_lurker I agree with you regarding tax exempt funds and the treatment of mutual funds capital gains distributions. That is why it is not correct to have short or long term capital gains distributions as Action=DIV for tax-exempt securities. It produces incorrect Tax Planner results. I manually change DIV to CGShrt of CGLong (if needed) to keep proper tax planning info. Usually Quicken treats CGLong correctly. It's a mutual fund's short term capital gain distribution that is usually incorrectly treated as DIV in Quicken. I think for non-exempt funds, DIV and CGShrt don't really make a difference except that qualified dividends can be taxed differently than a short term capital gain distribution.
I’ll try to be clear, because I think my position been misunderstood.
So while my point 1 stands, and I too correct such download errors (which are limited. I had 9 total STCGs last year, 6 in 2024, and 2 in 2023. Not all were erroneously downloaded),
"For a MF designated in Quicken as tax exempt, a Dividend download would be categorized as _DivIncTaxFree whereas a ST CapGnDist download would still get the _DivInc category. Getting the assignment on that type of fund wrong would generate a determinable error in the tax computation."
All the tax-exempt dividends for my tax exempt Fidelity MF's download as category _DivInc and not as _DivIncTaxFree when shown in the Investment transaction list. However, Quicken honors the tax exempt status due to the Tax Free flag on the security and the category shows as _DivIncTaxFree in Investment transaction reports. I did a search for _DivIncTaxFree to see if any dividends downloaded with that category and it found nothing.
Is there some setting to get them to download as _DivIncTaxFree in the Investment list?
Example of Investment list for tax-exempt dividend:
I think that is by design. Tax free dividends are still dividends. It is only in some reports that it distinguishes between taxable and tax free dividends and dynamically adds TaxFree to the Category.
For example, the Investing Activity report does not split out the Tax free dividends but the Investment Income report does.
I agree with Jim's explanation. My comment was inaccurate in that the Taxfree distinction gets applied at report levels (and I presume within the Tax planner). That said, things really are not as clear as they could be.
I finally did a test in my test file. Three transactions using a bogus manual mutual fund designated as Tax Free in its security details.
I then looked at the transaction list and six different reports.
As @leishirsute noted, the transaction list does not reflect the tax free status.
An Investment Transaction Report shows the correct action for each, but puts in Category as _DivIncTaxFree for all three. That is just plain wrong.
A Capital Gains report produces nothing (take my word for it). That is correct or at least by design. It is reporting sales of security. These types of CG distributions are not (directly) sales.
A Schedule B report (premier level and up) produces the below snip. The $200 is the CGShort transaction. That too is technically correct. There is no place on the Schedule B form for tax free dividends (or interest) and the LT Cap Gain doesn't fit here either. It is proper to note here that the Tax line assignment for the category _DivincTaxFree is Schedule B:Div income, non-taxable. (It might be nice if the Tax Free dividends were presented as such, but it could also be confusing.) Although there is no specificity to the info, you can drill down to get the details.
The Schedule D report properly includes the the LT Cap Gain Distribution. It would be better IMO if the report included the date and security as it does for the transactional capital gains, but you can drill down for the details if need be.
The Tax Schedule report captures the same information as the Sch B and D reports with more detail obvious. It appears fully accurate though it is also omitting the tax free dividend transaction.
Finally, the Tax Summary report subtotaled by Category: All three transaction appear under the correct subtotal categories. They show the correct action under the Num column. The category is correct for the two cap gain distributions and I am fine with their tax line item. The category for the dividend is confusing as is the tax line designation. A subtotal of _DivIncTaxFree is including what presents as a _DivInc transaction. This should be cleaned up IMO.
More than I intended to get into, but I hope helpful.
