It’s Tax Time Again!

You May Want to Wait to File Your Tax Return

Although we recommend that you prepare your income taxes as soon as you receive all tax documents, we strongly recommend that you wait until April to file your tax return and consider filing for an extension in the event corrected documents come in at the last minute.

Expect Reporting Delays

If you file your taxes and then delayed documents come in, you will need to file an amended return. We recommend that you use a qualified CPA for your tax preparation. Because of delayed legislation, we expect even more delays in reporting this year. Raymond James does everything it can to get information out in a timely and accurate fashion. 

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, 2019.  What the IRS terms “delayed 1099s” will not be sent until March 14th.  Raymond James has told us they will be mailing 1099s as soon as they receive information from investment companies, however, they expect delays just like in 2018.

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 assistants can help you set up Investor Access and third-party access if you wish to do so.

It is imperative to remember that certain investment types are prone to income reallocation. Because these reallocations frequently result in delayed or amended 1099s, the IRS grants reporting extensions for clients who hold these types of investments.  It is also important to note how some distributions are reported so that you avoid paying unnecessary tax. 

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 not other taxable distributions).  It is also suggested that you write ‘QCD’ next to the line to explain why the distribution is tax-exempt.

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:

  • 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 and middlemen 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.
  • 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 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. If you receive a W-9, you simply need to fill in your Social Security number, sign the form and return to the vendor. 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 the first 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.

Work with a CPA to Ensure Accurate Returns

If you have a question about your tax documents, please give us a call. Tax laws are very complex. Extreme care must be used in reporting accurate tax information. 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.

The bottom line is that it is important to file accurate and complete tax returns. For this reason, we recommend that you work with a tax professional. It is also important to note that the IRS never demands payment or personal information over the phone or by credit card. If you receive such a phone call, it is most likely a scam. The IRS will contact you in writing if there are any questions or issues.  Please feel free to contact us with any administrative questions regarding your tax documents from Raymond James.

Did You Know?

  • Twice in the past two decades, the IRS has outsourced tax-collection efforts to private contractors, and both times, the Treasury Department paid more money than it received in overdue taxes. The last time, starting in 2006, congressional tax analysts predicted that the companies could collect as much as $4.8 billion over a decade. The IRS eliminated the program three years later after losing about $4.5 million, according to a 2014 report from the Taxpayer Advocate Service, an independent organization within the IRS.[1]
  • Despite those losses, though, beginning in May 2017, for profit debt-collection companies the IRS hired to collect taxes were allowed to keep about 25 percent of the money they recover for the government. The IRS also gets 25 percent, while the rest goes to the Treasury Department.[2]

[1]. Alex Richards and Brad Wolverton, “Owe Back Taxes? Collection Agencies May Have Your Number,” CBS News, April 17, 2017, https://www.cbsnews.com/news/owe-back-taxes-collection-agencies-may-have-your-number/.

[2]. Ibid.