Consolidated 1099 Tax Statement Questions

Why is my 1099 not final?

Brokerage firms do not receive final tax distribution information for some securities until after Feb. 15, so 1099 statements sent to holders of these securities prior to Edward Jones receiving this final data are preliminary. We may still be waiting for final allocation information from some issuers of mutual funds, REITs, CMO/REMICs and certain foreign securities. Your 1099 is final, to the best of our knowledge, when “Figures Are Final” is displayed under the Edward Jones logo and above your address. You may want to consider this when making an appointment with your tax professional. 

The IRS deadline to issue Consolidated 1099 tax statements is Feb. 15. Therefore, you may receive your Edward Jones 1099 tax statements after Feb. 15.

What do covered and noncovered mean?

“Covered” and “noncovered” describe whether securities are covered by certain tax reporting regulations. When covered securities are sold, we are required to report cost basis on the investor’s year-end 1099. The following security types are covered by the regulations:

  • Shares of stock (not in a dividend reinvestment plan) purchased on or after Jan. 1, 2011
  • Mutual funds and shares of stock purchased through a dividend reinvestment plan on or after Jan. 1, 2012
  • Fixed-income securities designated by the IRS as being “less complex” and purchased on or after Jan. 1, 2014
  • Fixed-income securities designated by the IRS as being “more complex” are scheduled to be covered when purchased on or after Jan. 1, 2016.

All securities purchased before Jan. 1, 2011, are considered noncovered, and cost basis will not be reported to the IRS for these securities, regardless of when they are sold.

How do I report sales and exchanges?

Brokerage firms use Form 1099-B to report gross proceeds received from the disposition of securities – including sales, redemptions, exchanges, called bonds and returns of principal – to the IRS. Report each transaction as explained in the instructions for the relevant IRS form, generally Form 8949 and Schedule D for individuals. Generally, for each security sold or exchanged, you must provide the date acquired, date of sale or exchange, CUSIP, quantity, proceeds, cost basis, resulting gain/loss and holding period.

How do I determine cost basis?

The cost basis is generally the total amount invested in a security, including purchases, commissions, reinvested dividends and capital gain distributions, and is adjusted for any sales, mergers, splits, spinoffs or returns of principal. 

For domestic open-end mutual funds, Edward Jones uses the average cost method to calculate cost basis. For equities, Edward Jones uses the first-in, first-out cost method unless there were uncosted shares or it was indicated at the time of the sale that specific shares were being sold. If there were uncosted shares at the time of the sale and specific identification was not used, the uncosted shares will be sold first. 

According to the IRS, the taxpayer must determine cost basis, and the gain or loss of each 1099-B activity must be reported on Schedule D. 

If the security was purchased and held at Edward Jones and is tracked by our cost system, we will provide the cost basis of the sold security on your Form 1099-B.

What is a capital gain distribution on a mutual fund?

Capital gain distributions are generally earned when a mutual fund manager sells a security within the fund portfolio for a gain. The annual net gain recognized from sales within the fund is passed through to shareholders and reported on Form 1099-DIV. Long-term gain distributions are listed in Box 2a, Capital Gain Distributions, while short-term gain distributions are included in Box 1a, Ordinary Dividends. The amount of time the fund portfolio held the shares – not how long the individual held shares of the mutual fund – determines whether the gain is considered long-term or short-term. Long-term capital gain distributions are reportable on Form 1040, Schedule D, line 13. Ordinary dividends are reportable on Form 1040, line 9a.

Do I need to report tax-exempt interest?

In 2006, the IRS began requiring brokerage firms to report tax-exempt interest on Form 1099-INT. While this interest is not taxable at the federal level, it may impact the amount of Social Security benefits subject to tax. Please consult with your tax professional as to how to report this income.

What is the difference between qualified and non-qualified dividends?

The main difference between qualified and non-qualified dividends is how the IRS applies the method of taxation. Qualified dividends are taxed at the same rate as long-term capital gains while non-qualified dividends are taxed at the taxpayer's ordinary income rate. Dividends and long-term gains from equities, traditional preferred stocks, stock funds and foreign stocks that trade on a U.S. exchange may qualify for the reduced rate. 

The percentage of qualified and non-qualified income from mutual funds is based on the underlying assets within the fund portfolio. Generally, most distributions from stock funds are qualified, while most distributions from bond funds are non-qualified and balanced fund distributions are a mixture.

How can I recoup the foreign tax from a taxable account?

You may be permitted to claim a credit or take a deduction on your tax return. For amounts withheld in excess of the foreign tax withholding treaty rate, you generally have to submit a request for a refund to the foreign taxing authority. Each country has different filing requirements; contact your qualified tax professional for more information.

I have a joint account with another person, and the 1099 was issued to me. Can Edward Jones issue a 1099 to the other person for his or her portion of the income?

On various occasions, a client may receive income in an Edward Jones account that needs to be reported to another taxpayer. This normally occurs when:

  • Non-married joint tenants contributed to an account 
  • Securities belonging to someone else are sold in an account for convenience 
  • Assets are transferred to heirs after income is received in the deceased person’s account

The primary account holder must issue a Form 1099 to the actual owner of the income. (Normally, this is the other joint tenant and is called nominee reporting.) Please consult with your tax professional for assistance with nominee reporting.

More questions?

Contact your local financial advisor.

Important Information:

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.

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