Errors in Vanguard UBTI fees for MLP holdings [Unrelated Business Taxable Income]

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ultrabase
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Joined: Fri Mar 12, 2021 9:34 am

Errors in Vanguard UBTI fees for MLP holdings [Unrelated Business Taxable Income]

Post by ultrabase »

Back in 2021 Vanguard began charging a fee for holding an MLP investment that generated more than $1000 in Unrelated Business Taxable Income (UBTI). The fee is $300 for filing a 990-T form by Vanguard. Here is a partial text from the announcement.

"Vanguard Fiduciary Trust Company (VFTC), the custodian for IRAs held at Vanguard Brokerage Services (VBS), is responsible for IRS Form 990-T tax filings for MLPs. VFTC will begin charging a $300 fee per account for these filings. VBS will facilitate collection of the fee by deducting the fee amount from a client's brokerage account when a filing is required."

I just received a 990-T and a $300 fee for calendar year 2021. It was done completely incorrectly by Vanguard. First, I had only $886 in UBTI so no filing was required. (I had carefully selected my investment to stay under the $1000 limit.) Second, they took the (incorrect) $300 fee from my IRA account, instead of my taxable account. So they unnecessarily used my tax-sheltered IRA money for the fee when they could have used my taxable account.

I called Vanguard to complain and they put me on hold for a long time. Finally they came back said they could not explain it to me. They told me to talk to my tax advisor, and he/she would explain it to me. So arrogant! I don't need it explained, I need their error fixed.

My feeling about this is, that Vanguard has forgotten about the customer in their zeal for low costs. They don't care about doing it correctly or about explaining it to the customer, they only care about doing it as cheaply as possible.

Any similar experiences or comments?
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