Pesky 1099sSubmitted by Grunden Financial Advisory, Inc on March 11th, 2015
Some people rush to do their taxes as soon as they receive their last tax form, but is this the best action to take? If a person owns mutual funds in a taxable brokerage account, they may want to consider waiting until the end of March or even close to April 15th to file. It is not uncommon for brokerage firms to send out revised/amended/corrected 1099s after the original form was sent. These revised 1099s do not apply to retirement accounts like IRAs but only to “individual”, “after-tax”, “community property”, “joint w/ right of survivor” or “tenants in common” accounts. Specifically, 1099-DIV, which reports dividends received during the past year, is the most commonly revised 1099 form a brokerage firm will send out. If a person files their tax return and subsequently receives a revised 1099 form, they may have to expend the time, effort, and money to amend their tax return.
Why are dividends sometimes reclassified? Years ago, Congress required that 1099’s be postmarked no later than February 17th for the previous tax year but subsequently introduced the concept of qualified dividends and non-qualified dividends. The necessary data to determine qualified or non-qualified dividends isn’t always available by February 17th so mutual fund companies are forced to make estimates in order to comply with the deadline. If it is determined the estimates were not correct, the companies must issue corrections, which result in restated 1099s.
If you have received a revised 1099 in the past and are as frustrated by the extra non-productive work as we are, then please write your congressman/woman and tell them to simplify the tax code. There is no reason for it to be so complicated. No reason.
To write your representative, please click here. To write your senator, please click here.
Anyway, that being said, you may want to wait to file your tax return. Pesky indeed.