Monday, June 16, 2014

FINE WHINE: WHY MUST WE PUT UP WITH LATE ARRIVING CORRECTED 1099-DIVs EACH TAX SEASON?


Something must be done about late arriving corrected, sometimes twice, brokerage house Consolidated 1099 Tax Reporting Statements!

Clients who historically had their tax returns prepared in mid-February, when my time was not so tight, are now forced to wait until often the end of March, and risk GD extension, before getting me their “stuff”.

This serious tax-season disrupting problem has been around since 2004 – when the concept of “qualified” dividends was first introduced.  I do not recall corrected 1099 reports being issued to my clients prior to this - and if there were any they were truly few and far between so as not to be memorable.
 
What is corrected is the mix of ordinary dividends, qualified dividends, and, occasionally, capital gain distributions and “nondividend distributions”.  The gross proceeds number is never changed, nor is the cost basis (on both “covered” and “non-covered” transactions).  It seems to me that in most cases the dividends that are corrected are those issued by mutual funds.

I am surprised that the reporting software of the various mutual fund and brokerage houses has not been revised by now so that late annual multiple corrected information returns are no longer necessary.  They have had almost ten years!  Why does it take an extra month or more for the software to properly identify the correct status of dividends?  What information is not completely available by the third week of January - or, for that matter, when the dividends are actually issued?

Do you think if the IRS went back to requiring 1099-DIV forms, whether issued separately or in a consolidated report, to be delivered to taxpayers by January 31st, and strictly enforced this deadline by penalizing firms for issuing late or corrected returns, that they would make sure the software was fixed so that correct information was available on a timely basis?

I would appreciate some guidance from anyone "in the know" why corrected 1099-DIVs must be a necessity of the tax-filing season.

TTFN

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