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Tax Center

Please note: We provide this for informational purposes only. We do not provide tax advice.

Where can I find my client’s Tax Forms (such as, Forms 1099, 5498 and 8949)?

All tax forms can be found in your client’s Tax Center:

  1. Go to the client’s accounts page
  2. Under More Info select View Statements & Tax Records
  3. Select the Tax Center Tab

Tax documents are organized by calendar year. You can view other years by selecting the desired year from the View Reports menu.

What is a consolidated Form 1099?

A consolidated Form 1099 is produced for taxable accounts and details the income associated with that account for a particular year. Our consolidated 1099 Form is a single document with sections for the IRS Forms 1099-DIV, 1099-INT, 1099-MISC, 1099-OID and 1099-B. The first four 1099 documents are found on page one of the consolidated Form 1099. These, along with the 1099-B pages which list security sales and other proceeds, contain account data that is furnished to the IRS and must be included in your client’s tax return.

Which account types do not receive Consolidated Form 1099s?

The following accounts will not receive a Consolidated Form 1099:

  • Accounts with no security sales and less than $10 in dividend and interest income.
  • Non-taxable accounts (including IRA accounts which receive Form 1099-Rs, if applicable).
  • Subchapter-S corporate accounts which will receive a Form 1099 that only contains 1099-B information detailing the proceeds for covered securities that were sold during the year.
  • Subchapter-C corporate accounts which will receive an informational summary document that looks very similar to a 1099, but does not contain information that is reported to the IRS.

What is Form 8949?

Form 8949 is a listing of your client’s long and short term, reportable and non-reportable capital gains. We may generate 4 versions of IRS Form 8949, reporting sales of securities with short and long-term capital gains, further sub-divided into sales with cost basis reported to the IRS, and sales without cost basis or sales where cost basis is not reported to the IRS. Each of the 4 versions of this Form is necessary to complete Schedule D of your tax return. Please refer to IRS Instructions for Schedule D and Form 8949 for additional details.

What is a Form 1099-R?

Form 1099-R reports distributions of $10 or more from an IRA. This information is furnished to the IRS and must be included in your client’s tax return. Reportable distributions include normal, premature (with or without exception), death and disability distributions. Also reported are Roth conversion distributions, recharacterization distributions and correction of excess distributions made from your client’s Traditional, Roth, SEP, SIMPLE and Beneficiary IRAs.Form 1099-R also includes any federal and state tax withholding amounts actually withheld. This form will appear in your client’s Tax Center by January 31, 2014.

What is a Form 5498?

The 2013 Form 5498 reports the fair market value of your client’s IRA (as of December 31, 2013) and any reportable contributions made to his IRA in 2013.

Reportable contributions include rollovers, contributions, Roth conversion contributions, and recharacterization contributions made to your client’s Traditional, Roth, SEP, SIMPLE and Beneficiary IRAs. This form will appear in your client’s Tax Center by May 31, 2014.

When will my client receive his Form 1099?

Generally Form 1099s are posted in your client’s Tax Center around the end of February. When Congress enacted the legislation requiring brokers to report cost basis, the consolidated 1099 due date was changed to Feb. 15th. In an effort to provide your client with the most current data for his tax reporting we, like many other firms, request and receive a further 30-day extension of the deadline from the IRS in order to limit the number of corrected 1099 forms we must release based on issuer changes to issuer provided information.

Can I import my Form 1099 information into reporting software like TurboTax and H&R Block?

Yes. You can import the reportable data from your Form 1099(s) directly into tax reporting packages including TurboTax and H&R Block by using their import from brokerage/financial institution function. The following types of tax information can be imported:

  • 1099-DIV (Dividends and Distributions)
  • 1099-INT (Interest Income)
  • 1099-MISC (Miscellaneous Income)
  • 1099-B (Proceeds from Broker and Barter Exchange Transactions)
  • 1099-OID (Original Issue Discount)

Please note that the information found on your Form 1099-R cannot be imported at this time. You will need to enter this information manually.

How to import your information

  1. Open your tax program and follow the instructions for importing data from brokerages and other financial institutions. There you will be presented with a menu of available financial firms.
  2. Select FOLIOfn Investments from the menu. That will take you to a custom login screen.
  3. Enter your full Account Number and the Document ID found at the top of your Form 1099. You should not enter the spaces found in the Document ID.
  4. Your tax software will automatically enter your imported data into the appropriate sections of your tax return.
  5. Repeat this process for each of your accounts that received a Form 1099.

Additional Notes

Be sure to carefully compare all imported data with the information on your Form 1099(s) to ensure that all the information is correct and all activity is accounted for. In certain circumstances, the imported data may not contain all the information required by your tax return. For securities transferred into Folio from another firm, you may need to add or adjust cost basis information.

Should my client check his Form 1099 before filing and are they ever amended?

Your client should check his Form 1099 before filing because amendments to Form 1099s are frequently issued, especially if your client holds REITs, RICs, ETFs or mutual funds. There may even be multiple amendments made to your client’s Form 1099 before the tax filing deadline. Therefore, we strongly suggest that your client waits until at least the end of March before downloading his Form 1099 in order to allow any reclassifications or corrections to his Form 1099 to occur.

Your client will be notified through the Message Center and emailed when his Form 1099 has been amended. Folio Institutional has no control over the reclassifications that cause 1099 amendments and your client may have to amend his return if he files early.

Will an amended Form 1099 require my client to re-download his gains and losses?

If your client receives an amended Form 1099-B, he will need to download the updated gains and losses report. We strongly suggest that your client wait until at least the end of March before he downloads his Form 1099 in order to allow reclassifications or corrections to occur.

Why does it look like sections are missing from my client’s Subchapter-S Corporate Account 1099?

As of the 2012 tax year, there is a new IRS reporting requirement for Subchapter-S corporate accounts. The 1099 for S-Corp accounts only contains the sales information (1099-B) as well as any withholding, if applicable. The sales data is only reported for covered securities that were sold during the tax year. This is the information that is required to be reported to the IRS.

Subchapter-C corporations will continue to receive ‘informational’ statements. These accounts have no data that is reported to the IRS but get a statement from us that looks like a normal 1099.

Please contact us if you believe your client’s account is classified incorrectly.

Are there foreign tax considerations?

Depending on the country of origin, many foreign securities held as American Depository Receipts (ADRs) have foreign taxes withheld at the source. We receive the net dividend and pay it to customer accounts. Account holders can receive a credit for the foreign taxes that were withheld. To facilitate this, foreign dividend payments are shown on the Form 1099 with a breakout of any associated foreign tax that was withheld from the payment. The total foreign tax paid is listed on Page 1 of Form 1099, to be included on your tax filing.

How are Limited Partnership taxes reported?

Limited Partnerships distribute K-1s tax reporting forms directly to their limited partners (shareholders). Dividends from Limited Partnerships will not be reported on the 1099-DIV distributed by us. Our Form 1099 may contain a summary of any partnership distributions in a supplemental section.

K-1s are mailed in late February or early March (K-1s must be mailed to partners on record by March 15th following the close of the partnership’s tax year) unless an extension of time to file is applied for by the partnership.

Are there Trust Distribution tax considerations?

There are Trust Distribution tax considerations. Some trusts, especially royalty trusts and some Unit Investment Trusts do not pay dividends. Instead, they pay royalty distributions. These distributions are reported in the 1099-MISC section of Form 1099.

Where can I find my client’s Tax Center?

All tax information can be found in your client’s Tax Center:

  1. Go to the client’s accounts page
  2. Under More Info select View Statements & Tax Records
  3. Select the Tax Center Tab

We organize tax documents by calendar year. To view other years, select the desired year from the View Reports menu.

What is cost basis?

Cost basis is the original price your client paid for a security, including commissions and any other fees.

Cost basis information will be included on your client’s Form 1099-B, Form 8949, and the ‘realized gain/loss’ report which will be in your client’s Tax Center, when available.

What is adjusted cost basis?

Adjusted cost basis is used to determine the capital gains or losses of an investment for tax purposes. The original cost basis is adjusted to account for various events such as stock splits, exchanges, return of capital transactions and wash sales.

What are covered and noncovered securities?

Covered securities refer to the securities acquired in taxable accounts on or after the effective dates shown below. Securities acquired before the effective dates are called noncovered securities. Brokerages are responsible for reporting the total amount of cash paid by a customer, adjusted for commissions and fees from the purchase of the security for covered securities only.

  Covered Securities Noncovered Securities
Equities Acquired on or after January 1, 2011 Acquired before January 1, 2011
Mutual Funds and Most ETFs Acquired on or after January 1, 2012 Acquired before January 1, 2012
Fixed Income, Options or Other Securities Acquired on or after January 1, 2014 Acquired before January 1, 2014

What are Wash Sales?

The IRS created Wash Sale rules to prevent investors from deducting losses in certain situations.

Investors who sell securities at a capital loss cannot deduct the loss if they:

  • Purchase the same security within 30 days after the sale, or
  • Purchased more of the same security within 30 days prior to the sale.

Wash Sale rules apply to sales in taxable accounts only, although a purchase in a tax-deferred account can create a wash sale in a taxable account. For example, if you sell shares at a loss in your individual account and, within 30 days, purchase the same security in your IRA, or 401k account, part or all of the loss may be disallowed.

Examples:

Selling a security and buying it back within 30 days:

Scenario #1 The Result
On day 1, you sell 10 shares of company XYZ at a loss. On day 20, you buy back 5 shares of XYZ. You cannot deduct the loss from 5 of the 10 shares you sold on day 1 because you repurchased 5 shares within 30 days.

Selling a security that was purchased on more than one occasion, including once in the last 30 days:

Scenario #2 The Result
You buy 10 shares of company XYZ. One year later, you buy 5 more shares of XYZ. Twenty days later, you sell the 10 shares you bought over a year ago. The sale creates a loss. You cannot deduct the loss from 5 of the 10 shares you sold on day 1 because you repurchased 5 shares within 30 days.
Scenario #3 The Result
On day 1, you buy 10 shares of company XYZ. On day 30, you buy 10 more shares of company XYZ. On day 40, you sell the 10 shares you bought on day 30. The sale creates a loss. You can deduct the loss from this sale. The sale of the second purchase was 40 days after the first purchase, so the first purchase does not disqualify the loss from the sale of the second purchase.
Scenario #4 The Result
On day 1, you buy 10 shares of company XYZ. On day 15, you buy 10 more shares of company XYZ. On day 25, you sell the 10 shares you bought on day 15. The sale creates a loss. You cannot deduct the loss from this sale. The sale of the second purchase was made within 30 days of the first purchase, so the first purchase disqualifies the loss from the sale of the second purchase.

Disallowed losses can be added to your purchase cost!
Wash sales aren’t all bad news. Losses that are disallowed can be added to the price you paid for the repurchased shares. Review this example.

The Scenario The Result
On day 1, you sell 10 shares of company XYZ at a loss of $5 a share. On day 20, you buy back 10 shares of XYZ. You cannot deduct the loss from your sale on day 1. You can add the $5 a share disallowed loss to the cost per share of the day 20 purchase. So, if you paid $10 a share on day 20, you can state that you paid $15 a share.

Wash Sales can be confusing, and there are many conditions that may trigger a Wash Sale classification. Also, Wash Sale rules apply to trades made in brokerage accounts across multiple firms.

If you’re concerned that you may be creating wash sales, consult a tax advisor or financial consultant for specific advice on when to buy or sell.