Tax complexities delay distribution of 1099s

As brokerages feel pressure to ramp up, forms coming later than usual

Feb 19, 2015 @ 12:46 pm

By Mark Schoeff Jr.

Many investors who are eager to file their taxes are frozen in place along with their advisers, as they wait for paperwork from their financial institutions currently wrestling with increasingly complicated reporting requirements.

“The trend has been to issue the 1099s on investments later and later,” said Leonard Wright, a CPA. “This is a multifaceted issue that has been triggered by the complexities of the tax laws.”

For instance, brokerages must determine how to report preferential tax treatment for qualified dividends and also must now report the tax basis for stocks sold by customers, said David Taylor, a CPA and partner at Anton Collins Mitchell.

Investors champing at the bit to get their tax returns filed may not realize brokerages are trying to ensure 1099s are accurate and won't need to be corrected later.

“They don't understand the pressure that brokerages are under to get these things right because there is no de minimus exception,” Mr. Taylor said. “The whole regulatory burden has been shifted to brokerage firms.”

1099s are based on information from investment companies, which may reclassify fund distributions and dividends. The uncertainty is causing some firms to delay sending out 1099s.

Most TD Ameritrade Institutional clients have not yet received their 1099s, according to spokesman Joe Giannone. The firm expects to post them online this weekend and mail them early next week.

“We feel it's better for the clients if we hold off distributing the 1099s,” Mr. Giannone said. “We want to minimize corrections.”

Wells Fargo Advisors began sending out 1099s on Sunday, according to spokeswoman Rachelle Rowe.

“We're on track,” Ms. Rowe said.

Fidelity Investments has a page on its website outlining the 1099 schedule for its investors. It planned to distribute 1099s beginning on Feb. 14 and continuing until March 14, depending on the information they get from investment companies.

The Charles Schwab Corp. mailed all of its 1099s on Tuesday, according to spokesman Mike Peterson. They were available online as of Feb. 11.

The deadline for a 1099, or a 1099b, was Tuesday.

“The IRS won't get excited about it until the end of February,” said Jimmy Williamson, a CPA and partner at MDA Professional Group. “Some brokerage houses do it better than other brokerage houses.”

There is a difference of opinion among CPAs about whether investors should file their tax returns when they receive their initial 1099s or wait to see if corrected 1099s are issued.

Investors should not use 1099s that indicate they are not final calculations, Mr. Williamson said. The IRS will get the final 1099 and compare it with what the investor filed.

“That's a big red flag,” Mr. Williamson said. “Do not file your return with these numbers. If it doesn't match, you could get corrections that initiate an audit.”

But if investors wait for corrected 1099s before sending tax information to their accountants, it can put CPAs under the gun as April 15 nears, according to Mr. Taylor.

“I wouldn't hold up the process” waiting on the final 1099, Mr. Taylor said. If a correction occurs, the accountant can change a draft return.

The last thing investors should do is try to figure out on their own the taxes they owe from their investments, said Janet Krochman, a CPA.

“If you have more exotic investments, you're better off waiting for the 1099b, even if it's delayed,” she said.

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