Tax early birds, be forewarned

Those intrepid folks who rush to the tax preparer in early February, the minute they receive the last of their W-2s, 1099s, 1098s and other tax statements, may have to cool their heels for a couple of weeks. The IRS is now allowing brokerages until February 17 to send out their 1099-B tax forms, an extension of 2 1/2-weeks beyond the traditional, January 31 deadline. 

Form 1099-B is the statement that reflects the dividends or distributions your mutual fund passed on to you after selling a portion of its holdings in the prior year. (Whether you actually had a gain in 2008 is another story altogether.)

The change, which is effective for tax-season 2009 and beyond, is in response to the investment industry's concerns that it wasn't getting all the information from individual mutual funds in time to process and send out the tax statements to clients by January 31. Last tax season, 12-14 percent of all 1099-Bs had to be re-sent with corrections, says Travis Larson, a spokesman for the Securities Industry and Financial Markets Association (SIFMA). The meant some taxpayers had to delay their tax filings anyway, or filed an amended return. 

"Each year the transaction volume increases and more firms have had to send out corrections because the fund changed its distribution or something else," Larson says. The process of producing 1099-B also has been further complicated by new laws passed in the last couple of years that changed the tax treatment of certain distributions. 

Last tax season, some brokerages asked for and got extensions in sending out their 1099-Bs. Now, it's official for everyone. 

Adam Banker, a spokesman for the investment giant Fidelity, said his company included information on the change in its December and January statements to clients, and will have the same information on the Fidelity Web site. Banker said Fidelity plans to begin mailing out tax statements throughout January and into February--basically, as soon as it gets the proper information. As a result, many customers may not notice much of a difference. 

If your investments didn't make any distributions or dividends--say, you just have interest income, reported on Form 1099-INT--your tax statements may come shortly after January 31, as usual. 

Comments

[Sean]

The 1099-B reflects sales of securities.
The 1099-DIV reports the dividends and distributions you receive from brokerage accounts. These are the forms which are often revised, not the 1099-B.
Yes the brokerages have until the extended due date, but this will save overall costs for both the brokerage and the taxpayer. The brokerage also is aware if you have any mutual funds, which are the reasons for reclassifications. Otherwise, it could mail out your 1099 without waiting for such revisions.