Don’t Rush To File Your Taxes

tax fristrationWe know that clients are starting to receive their tax reporting documents in the mail and online (Forms 1099-DIV, 1099-INT, 1099-B, etc.).

So just in case you like to be first in line when filing your taxes, take a deep breath and slow down.

It doesn’t pay to be too early, since it’s very possible that the tax information you’re receiving from your brokerage firm may be revised once or twice.

If you file too early, you’ll need to amend your tax return, which won’t make your tax preparer a very happy person.

In fact, one CPA we spoke with today had some good advice.  “Go ahead and prepare your return,” he said. “But then put it aside and don’t send it in to the IRS until you are absolutely sure that the tax information you receive from your broker won’t be corrected.”

Vanguard just gave their clients the same guidance:

“If you’re a brokerage client who has received a corrected Tax Information Statement in the past, you may receive one this year as well. To avoid having to file an amended return, you may want to wait until closer to April 15 to file your taxes.”

That’s good advice to save your time and that of your tax preparer. For clients who own more complex investments – like pass-through bonds, MLPs (Master Limited Partnerships), real estate or foreign investments – it’s not unusual to get a late or corrected 1099. We’ve seen cases where even the corrections receive corrections!

Don’t blame your broker for the mess. They compile the information they receive from different custodians and mutual fund companies, and sometimes that information gets changed around. A dividend paid to you in 2014 was actually for tax year 2013, one payment was not interest but your own capital being returned to you, some foreign taxes got recalculated… you get the idea. Let’s not even get into the whole complication of whether dividends are qualified or not, gains are long or short, etc.

The truth is our crazy tax code is to blame – all 73,954 pages of it.

So here’s some helpful tax prep advice:

  • Clients are welcome to call us with any tax reporting questions. Whatever you’re missing, we can get to you pronto.
  • Don’t hold your breath to get all your tax information by the old January 31 “deadline.” Some reporting won’t be sent to you until mid-February.
  • For a great chart explaining what forms you may receive and what it all means, check out this handy Vanguard website. It will help you tell your 1099-Qs from your 5498-ESAs, so you can show off your tax savvy at the next cocktail party!

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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