By Kevin Rigg, Director of Financial Life Planning, SoundView Advisors
The 2020 tax season is underway! Here are the answers to some of the most common tax-reporting questions we receive from our clients.
WHEN SHOULD I EXPECT MY INVESTMENT RELATED TAX FORMS?
Taxable Accounts – If you haven’t already received your Consolidated Form 1099 from Schwab or Pershing, you will receive it in the next couple of weeks.
o This form is produced for each of your taxable investment accounts and reports the income associated with that account during the year (interest, dividends, and sales proceeds).
o As has been the case for several years now, these forms are often mailed out well after the previous January 31st deadline. This is done to reduce the number of corrections and revisions that frustrated custodians and investors in prior years.
o If you have not received your Consolidated Form 1099 in the mail or electronically by early March, please let us know and we will help track it down for you.
Retirement Accounts – If you made a distribution out of any retirement account (401k, 403b, IRA, etc.) during 2019, then you can expect to receive a 1099-R from the account custodian reporting the amount distributed.
o The deadline for custodians to send these forms out is January 31st, so you can expect to receive yours any day now if it hasn’t already arrived.
Private Placements – If you have invested in private placements, you should receive one or more additional investment-related tax documents that you will need to report on your return.
o If any of your private placement investments are in a partnership, you will receive a Schedule K-1 and can expect that from the partnership by the end of March.
WHAT ELSE SHOULD I KEEP IN MIND FOR FILING MY TAX RETURN?
Roth Recharacterizations – In the past, you had the opportunity to “undo” a Roth conversion up until the final filing deadline of October 15th. This is no longer an option, so any Roth conversions made in 2019 are final and must be reported as income on your return.
Qualified Charitable Distribution (QCD) – A QCD is a charitable gift made directly from your IRA that does not have to be reported as taxable income on your return. Unfortunately, the full distribution is still reported on the tax form (1099-R) and it is your responsibility to remove the QCD amount from the taxable portion and note it on the return.
Tax-Favored Account Contributions (IRA, Roth IRA, HSA) – If you have already made a contribution to one of these accounts for 2019, please make sure it is reported on your return. Do keep in mind that the contribution deadline is April 15, 2020, so you still have time to fund these accounts for the 2019 tax year.
We're here to serve! We know that tax filing time can be stressful as you gather documents and records and prepare to file your tax return. We hope this clarifies some issues for you, but please let us know if you have any more questions.