Where’s my 1099? {The 2014 edition}

February 19, 2014 12:00 am

Derek M. Amey

Partner & Co-CIO

Last year I wrote a blog about 1099’s and why investors should expect their 1099’s to arrive in late February. I thought now would be a good time to republish this blog, because most of the information is still accurate.

I said it last year, and I will say it again this year; unless there is a major change in tax laws, or a technological breakthrough on tracking gains and losses, the January 31st deadline for 1099’s may never return.

OK, but why?

The primary cause of delayed 1099s has been around since 2003. Back in 2003, the President and Congress passed a bill that changed the tax code for dividends, lowering our taxes on certain dividends. Corporations must now report the breakdown of their dividend payments between ordinary dividends and qualified dividends. The treatment for taxpayers is different between the two dividend categories; thus it must be broken out to ensure proper tax filing. This change was a positive to all of our wallets, but a negative to our poor accountant’s mental state. For many accountants, they’ve lost 28 days in February that they used to have to be able to start returns and instead gained yet another line item that must be entered and reviewed.

Who’s to blame? We’re all to blame a little bit!

I was here at StrategicPoint in 2004. That was the first tax season following the tax law change. It was a very “difficult” tax season as folks saw as many as 5 or 6 revisions to their initial 1099. The clearing firms blamed the mutual fund companies, the mutual fund companies blamed the corporations and the corporations blamed Washington DC and the taxpayers for having the audacity to want lower taxes.  The clearing firms were correct because all they could do was report what the mutual fund houses told them. The mutual fund houses were also correct because they had to wait to hear from the corporations on what type of dividend was paid out. Finally, the corporations were correct in that the determination on what type of dividend was paid can and does take time, which delayed the entire process. With each revised 1099, it meant refilling a corrected tax return which meant another charge from the tax preparer. To top it off, in many cases the nominal difference in the categories of qualified verse ordinary was minuscule.

Why does it seem to be getting later and later every year?

This part is different for 2014. This year hopefully most 1099s will be mailed by February 28th, which was the same day as last year. So even if it seems like they may be arriving later in 2014, they are actually being mailed the same exact day. If an investor owns a complex investment (like a REMIC or some very specific UIT’s) there may be further delays until March. However, for the average investor this should not apply. The delays, like previous years, are being done to save everyone time, money and energy. The hope is that with the delayed mailing date, hardly any revisions will need to me made, which means clients, accountants, and everyone in between will stop finger pointing and just get the taxes done accurately. While the delayed date can fray tax payers’ and the tax preparers’ patience during tax season, knowing that the forms are less likely to be revised means getting taxes done once and right the first time.

Derek Amey serves as Managing Director and Portfolio Manager at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail him at damey@strategicpoint.com.

The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Derek’s opinions and comments expressed on this site are his own and may not accurately reflect those of the firm. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.