Over the last few years, there has been a pattern of delayed tax reporting due in part to delayed clarification from the IRS and legislation. We expect this to be the case for the 2021 documents. With this in mind, we recommend that while you work on your returns as soon as possible that you wait until April to file your tax return and consider filing for an extension if you anticipate needing the extra time. Please note that even if you file an extension, your full tax payment is due by April 15th. If you file your taxes and then delayed documents come in, you may need to file an amended return. Raymond James does everything they can get information out in a timely and accurate fashion. The following will give you an idea of when you can expect forms.
Expect Reporting Delays
Because there are often last-minute corrections and delays, many companies will not mail the first round of 1099s until February this year. The first round of 1099s is expected to be sent between February 15th and 28th, 2022. What the IRS terms “delayed 1099s” will not be sent until March 15th. Raymond James has told us they will be mailing 1099s as soon as they receive information from investment companies, however, they expect delays. After March 15, amended 1099s will be mailed as needed. There is no cutoff date for amended forms.
All tax documents are available via the Client Access online portal as soon as they are generated. You may also give your CPA access to these electronic documents by setting up Third-Party Investor Access. Our client concierge team can help you set up Client Access and third-party access if you wish to do so.
It is important to note that certain investment types are prone to income reallocation. It is also important to note how some distributions are reported so that you avoid paying unnecessary tax. This is one reason we recommend working with a CPA. We are happy to provide a referral, if needed.
For example, if you took a Qualified Charitable Distribution (QCD) from your IRA, you do not need to pay tax on this amount. The full distribution is reported on the 1099R – there is no reporting that this is tax exempt. It is suggested that the full distribution is reported on line 15a of the 1040 that on 15b your write, $0 for the taxable amount (if you have no other taxable distributions). It is also suggested that you write ‘QCD’ next to the line to explain why the distribution is tax-exempt. Failure to do this can result in paying taxes that you do not owe.
The other place that we see clients sometimes overpaying tax is by missing the cost basis information and reporting on all proceeds versus just realized capital gains. This is another reason to use an experienced tax preparer or CPA.
Forms You Might Receive
The types of tax forms you receive will depend on the types of investments and income you have. Please note the following:
- Please note that that clients with IRAs that took systematic distributions last year will likely get two 5498’s. With RJ switching custodians, if they had a distribution before and after Sept., you may get separate 5498 from each.
- Widely Held Fixed Investment Trusts (WHFITs) — Under the IRS definition, the affected market segments include Unit Investment Trusts (UITs), Royalty Trusts, Commodity Trusts and Mortgage Pools such as Fannie Mae. Trustees of WHFITs are required to report all items of gross income and proceeds on the appropriate Form 1099. The reporting deadline for these items is March 16th, so you may receive a delayed 1099 (early April) if you own these types of investments. We generally do not work with these types of investments.
- 1099-B— If you receive a 1099-B (“Proceeds from Broker and Barter Exchange Transactions”), please keep in mind that you are responsible for reporting the gain or loss on what you sold, not the entire amount. This means that you are responsible for the difference between what you originally paid for an asset and what you sold it for. We will provide cost-basis information on holdings that we have the data for. If you have transferred an asset or cost basis and it is not showing on your statement, please call our office.
- W-9— You might receive a W-9 form from your mutual fund and/or annuity companies. These are used to confirm and/or update your Social Security number. These are mailed as a matter of routine every few years.
- Nontaxable transactions— You might receive a 1099 for nontaxable transactions such as an IRA rollover or 1035 exchange of an annuity. A 1035 exchange is reported as Code 6 in box 7, a direct rollover to an IRA is reported as Code G in box 7, and a direct rollover to a qualified plan or TSA is reported as Code H in box 7. Receiving one of these 1099s does not necessarily mean you owe taxes, but you should follow the IRS instructions carefully for reporting this type of transaction. You will also receive a 1099 for QCDs, as noted above.
- K-1 forms— Schedule K-1 forms (Partner’s Share of Income, Deductions, Credits, etc.) are issued by partnerships, S-corporations, trusts and estates to report a taxpayer’s prorated share of net income or loss from the entity, along with various separately stated income and deduction items. By law, these forms must be sent by March 15th following the close of the partnership’s tax year. Therefore, you might not receive your K-1 until late March or even the first week of April.
If you have a question about your tax documents, please give us a call. Tax laws are very complex. Both our office and the Raymond James 1099 Tax Reporting Department can answer many of your questions; however, we are not accountants and cannot provide specific tax or legal advice. We can recommend a qualified Certified Public Account (CPA) if you need assistance in preparing your taxes.
You can also get answers to many of your questions by reading free IRS Publications. You can obtain copies by calling 1-800-TAX-FORM (1-800-829-3676) or by visiting the IRS website at www.irs.gov, where you can also print tax forms.
Important to Note Regarding Scams
The IRS never demands payment or personal information over the phone or via email. The IRS never asks for a credit card. If you receive such a phone call, it is most likely a scam. The IRS will only contact you in writing via postal mail if there are any questions or issues.
The IRS will never threaten to bring in local police, immigration officers or other law enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.