by DAVID NOVAK
With April 15th just around the corner, it means that we will get asked our most frequently asked question of the year by far—“When will the 1099’s be sent?”
Investors get 1099s each year from the firms in which their various assets are held in custody. These can take many variations, but among the most common are the Form 1099-DIV, which is used to show dividends received in the previous calendar year;
1099-INT, which reports investment interest income; and 1099-B, which reports the sale of stocks or mutual funds. For investors who own these different types of assets in a brokerage account, the brokerage firm will issue a single 1099 which includes everything. Copies are sent to the IRS, which matches the reported income with the investor’s tax return.
Originally, the deadline for mailing out this information was January 31st, but as it became more common for income to be reclassified, this deadline has been pushed back.
One of the firms that we use to hold client assets sends out 1099’s in three different mailings—February 15th, March 1st, and March 15th, with the most complex saved for last.
The theory behind doing this is to just send a single 1099, rather than an initial 1099 and then an amended one a few weeks later. If the client has already filed their tax return using the original 1099, this can potentially result in needing to file an amended
return (not to mention potentially paying your CPA again). Some CPA’s believe that certain amended filings can be more likely to initiate an audit.
While mutual funds are usually the source of these delays, stocks can be as well, and in theory there is no deadline as to when they can reclassify income. In an extreme
example last fall, one of our clients had an investment that reclassified income back to 2014!
The best way to deal with the issue of amended 1099’s is simple—delay filing your tax return as long as you can. If you have multiple late 1099s, you can request an automatic six month extension by filing Form 4868 (although you are required to estimate and pay any tax due by April 15). After requesting an extension and paying the appropriate amount of tax, you can file your return any time until October 15 and include investment income
reported on the corrected 1099s.
David Novak, CFP® is a Certified Financial Planner™ at Novak & Powell Financial Services in Pinellas County. Please note: he is not an attorney and this article should not be
construed as one offering legal advice. For information about investment decisions and financial planning, email him at firstname.lastname@example.org.