Prepare Now for Tax Season
The initial tax filing season for 2022 is approaching and we want to provide some reminders to help you prepare.
Your custodian (Fidelity, TD Ameritrade, Schwab) provides the basic tax reporting for your accounts.
TAXABLE ACCOUNTS – FORM 1099
For a taxable account, you will receive a consolidated 1099 form, which reports interest (1099-INT), dividends (1099-DIV), realized capital gains and losses (1099-B) and any miscellaneous income (1099-MISC) all in one report.
If applicable, Forms 1099 will also include other expenses paid out of your taxable accounts such as custodian fees, margin interest, and foreign taxes which may also be deductible. Investment advisory fees paid to ACM will also be reported on your 1099 form.
You should provide the consolidated 1099 form for any taxable accounts (individual, joint, trust) to your tax preparer/CPA, if you are using one. If you don’t want to wait for your 1099 to come in the mail, you can log in to your account through your custodian’s website and access your 1099 online and download it at your convenience.
As of this commentary, your custodian may have only a “preliminary 1099” available online, which means that they have accumulated most, but perhaps not all the information needed at this time to complete your tax return.
Public companies sometimes re-characterize income after year-end, which may result in your custodian having to issue one or more revised 1099 forms before a final 1099 form is complete. For this reason, if you plan on filing by this year’s April 18 deadline, your tax preparer may recommend that you wait until late March to ensure that you have the complete data.
For California residents of hard-hit counties – the IRS and the state of California have decided to extend the tax season for residents with an IRS address located in a disaster area (currently 31 of 58 counties), meaning certain CA taxpayers will have until May 15 to file their state and federal tax returns and to make contributions to IRAs and health savings accounts.
IRAs AND RETIREMENT ACCOUNTS – FORM 1099-R AND 5498
Distributions from IRAs and other retirement accounts typically constitute ordinary income and are reported on Form 1099-R for tax purposes, which you should also provide to your tax preparer and which can be similarly accessed online, when available, by logging into your account.
Form 5498 is an information statement tracking IRA contributions that is not required to be filed with your tax return. Because taxpayers have until April 18 to make contributions to IRAs for the prior tax year, form 5498 is sometimes not posted until May, which means you may have finished your taxes before you receive this form.
FORM 1065 – SCHEDULE K-1
Investors in certain ACM investment strategies may have owned securities issued by publicly traded limited partnerships or limited liability companies. Each investor’s share of the partnership’s income, deductions and credits, are reported on Schedule K-1 (Form 1065), which is issued by each respective limited partnership/limited liability company and reported separately from Form 1099.
Individual K-1s are typically distributed by the security issuer in March and can be found through the Investor Relations section of the issuer website or via www.taxpackagesupport.com.
We hope that you find the above information useful in the preparation of your 2020 tax returns and, if you have questions, please reach out to your ACM Wealth Advisor.
All information is provided for guidance and information purposes only. The information contained herein has been compiled from sources deemed reliable and it is accurate to the best of our knowledge and belief. Advisors Capital Management is not an accounting firm and this information should not be interpreted as accounting or tax advice. Please contact your tax preparer or tax adviser for additional information
The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.