Where’s My 1099?February 14, 2013 12:00 am
Tax season has just started, and the annual wrangling over documents for our accountants has begun. For you early birds, the delay in 1099’s every year is a major nuisance. Let’s get something out right away: unless the tax laws change or technology increases dramatically, the January 31st deadline for 1099’s may never come back.
OK, but why?
The primary cause of delayed 1099’s 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 as many of you may have been as well. 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?
The reality is that it is getting later. This year most 1099’s will not be mailed until February 28th. This is 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 Financial Advisor and Portfolio Manager at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail him at firstname.lastname@example.org.
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.