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Interactive BrokerspresentsUnderstanding your US taxforms, what does yourConsolidated 1099 Tell you?Nancy A. Nelson CPA,Tax Director, Interactive BrokersWebinar begins @ 4:00 pm ESTwebinars@interactivebrokers.comMember SIPC www.sipc.orgwww.ibkr.com/webinars1
IntroductionUnderstanding your tax information forms is essential topreparing Federal and State tax returns.Focus today on US Individual Tax Returns but most items are thesame for trusts, partnerships and LLCs.2
Circular 230 NoticeThe information in this presentation is provided forinformational purposes only, and does not constitutetax advice and cannot be used by the recipient or anyother taxpayer to avoid penalties under any federal,state, local or other tax statutes or regulations, or toresolve any tax issue.3
Tax Information FormsW-2 – Wage reportForms 1099 – 17 different onesForm 5498 – IRA contributionsForm 2439 – Undistributed LTCGForm 1098 – Mortgage Interest paid.4
Consolidated 1099Consists of 5 different 1099 forms:1099 INT – reporting interest, including USTand tax-exempt interest1099 DIV – reporting dividends, LTCGdistributions, return of capital5
Consolidated 10991099MISC – for IB reports payments in lieu ofinterest, dividends and stock loanpayments received1099OID - Accrued interest on bonds when thebond price is discounted to reflectinterest or interest rate changes6
Consolidated 10991099B - Net proceeds for sales of securitiesCovered Short-termCovered Long-termUncovered7
Other 1099s1099R – Distributions from Qualified PlansIRAs8
When are 1099s issued1099R – On or before January 31Consolidated 1099 – Generally on or beforeFebruary 15. When the date falls on aSaturday or Holiday the next business dayapplies. In 2015, on or before February 17.9
Other IB Tax ReportsDividend report – February 15th (2/17 in 2015)Form 8949 Worksheet – Feb 15th (2/17 in 2015)Form 5498 – May 31st10
Other IB Tax ReportsForm 2439 – 90 days after the fiscal year end ofthe RIC or REIT that generated thereport.Canadian Form NR-4 – March 31st11
Form 1099R and 5498Form 1099R reports distributions:Remember all distributions must be reportedon your tax return (line 15A, Form 1040), evenRoth distributions. This line does not add intoyour taxable income.If you have a traditional IRA – Use Form 8606to calculate taxable amount12
Be aware of the 1099R Box 7 codesMost common:1 – Early distribution, no known exception (in mostcases 59.5)2 – Early distribution, exception applies (under age59.5)3 - Disability4 – Death7 – Normal distribution13
Form 5498Reports IRA contributions made for prior yearIssued May 31Remember – you can make contributions to your IRAaccount until due date of your return (4/15)If you have a traditional IRA and make after taxcontributions remember to file an form 8606 with yourreturn to track cost basisAlso reports the FMV at 12/31 of the prior yearto IRS – this amount is reported to you byJanuary 31.14
Form 5498Change in IRA trusteeForm 5498 reporting FMV only (no 2014 contributions)from Principal Trust Co.Form 5498 reporting FMV and 2014 made in 2014contributions from Principal Trust Co.Form 5498 reporting 2014 contributions made in 2015from Equity Trust Co.15
Consolidated 1099Consists of:1099INT1099DIV1099OID1099Misc1099BReported together (consolidated) on oneinformation sheet.16
Consolidated 109917
1099INTWhat are the important lines?Line 1: Interest IncomeLine 3: Interest on US savings bonds andtreasury obligationsLine 4: Federal Income tax withheldLine 8: Tax-exempt interestLine 9: Specified private activity bondinterest18
1099INTThings to be aware of:Accrued interest paid: not reported to the IRS but is includedin the supplemental information on the consolidated 1099Tip: Enter total of interest received on tax return and anyaccrued interest as a separate 1099 with a negativeamountRemember: Interest income cannot be reduced byaccrued interest paid until the first interestpayment on the same security is received19
1099OIDWhat is OID?Interest on bonds sold at a discount andaccreted annually.Zero coupon bond is classic example.20
1099OIDWhat are the important lines?Line 1: OID for 2013Line 2: Other periodic interestLine 6: OID on US Treasury Interest21
1099DIVWhat are the important lines?Line 1a:Line 1b:Line 2a:Line 2b:Line 3:Total ordinary dividendsQualified dividendsTotal capital gain distributionsUn-recaptured Sec. 1250 gainNon-dividend distributions22
1099DIVWhat are the important lines (2)?Line 5:Line 6:Line 8Line 9Investment expensesForeign tax paidLiquidation distributions – cashLiquidation distributions – non cash23
1099DIVWhat are the important lines (3)?Line 10: Exempt Interest DividendsLine 11: Specified Private activity bondinterest dividends24
1099DIVThe Dividend report is your guide to the details25
1099MISCWhat are the important lines?Line 2: RoyaltiesLine 3: Other IncomeLine 4: Federal Tax withheldLine 8: Substitute payments in lieu ofdividends and interest26
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1099BMade up of 3 forms:Covered – short-termCovered – Long-TermUncovered28
1099BForm 8949:Presented in filing formatHas all the details for all three formsRemember that these are account specific.Your tax return covers all of your accounts.29
Other Information that we provideOn consolidated 1099:Margin interest paidPayment-in-Lieu (PIL) paidAdvisory fees paidAccrued Income paid30
Other Information that we provideOn dividend report:Qualified dividends that meet the holding periodDetails of all dividends paidDetails of all PIL paid and receivedDetails of Foreign tax paid31
A word about the new NIINet Investment Income (NII) Tax –part of the Affordable Health Care Act3.8% on NIIForm 892032
A word about CP2000 NoticesWhat is a CP2000 noticeWhy you may have receivedHow to respond:Key items to include in any correspondence:A copy of the noticeWhy you think they are wrongA copy of the return where the item appearsKeep a mailing record (certified, return receipt)33
A second word about the CP2000Keys to success:Respond promptlySend to the address they indicated, payments go to a differentplace than the inquiries.BE PATIENT – you will get a letter that says they are looking into it and it will be at least 6 weeks before they respond.34
Wrap upGood resources:IRS Publication 550 – Investment Income and expensesIRS Publication 551 – Basis of assetsInstructions to the forms:Instructions to Form 1040 Schedule A and Schedule BInstruction to Form 1040 Schedule D and Form 8949Instructions to Form 4952 – Investment Interest expenseInstructions to Form 8920 – NII (draft released 1/7/14)ALL on www.IRS.gov for free!!35
DisclosuresOptions involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of StandardizedOptions”. For a copy visit interactivebrokers.com/disclosures or call 312-542-6901.Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before tradingfutures, please read the CFTC Risk Disclosure. For a copy visit interactivebrokers.com.Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater thanyour initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. For a copy visitInteractivebrokers.com.There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to timezone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settleforeign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiplemarkets.The Order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock ina profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but notboth. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in themarketplace.There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results.Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.Interactive Brokers LLC is a member of NYSE FINRA SIPCInteractive Brokers LLC is registered with HKSFC and is a participant of the Sydney Futures Exchange (SFE)36
Consists of 5 different 1099 forms: 1099 INT -reporting interest, including UST and tax-exempt interest 1099 DIV -reporting dividends, LTCG distributions, return of capital 5. . accrued interest as a separate 1099 with a negative amount Remember: Interest income cannot be reduced by accrued interest paid until the first interest
