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, due to mail time, you may receive your Edward Jones 1099 tax statements after Feb. 15. With Edward Jones Online Account Access, you can access your tax statement online as soon as it is final.
“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:
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.
Brokerage firms use Form 1099-B to report to the IRS gross proceeds received from the disposition of securities – including sales, redemptions, exchanges, called bonds and returns of principal. Report each transaction as explained in the instructions for the relevant IRS form, generally Form 8949 and Schedule D for individuals. Usually 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.
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.
If the security was purchased and held at Edward Jones and tracked by our cost system, we will provide the cost basis of the sold security on your Form 1099-B.
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, Total capital gain distributions, while short-term gain distributions are included in Box 1a, Total 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.
In 2006, the IRS began requiring brokerage firms to report tax-exempt interest on Form 1099-INT. While this interest may not be subject to federal income tax, 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.
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, most distributions from bond funds are non-qualified and balanced fund distributions are a mixture.
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.
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:
If the income is that of another taxpayer and not that of the primary account holder, the primary account holder may need to issue a Form 1099 to the actual owner of the income using a process called nominee reporting. Please consult with your tax professional for assistance with nominee reporting.
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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