You were feeling so relieved. Your taxes were finally done and sent off to the IRS.
But that feeling of relief lasted only a short minute, as soon as you returned home and found yet another corrected tax form waiting for you in your mailbox. Is there anything more aggravating?
We can assure you that absolutely no one is happy to get a corrected Form 1099, especially if they have already filed their taxes.
So what’s behind the tidal wave of corrected 1099 tax forms that many of our clients have been receiving?
Unfortunately, the corrected tax reports are a direct result of changes in the 2018 tax laws and new rules relating to the 20% tax break for Qualified Business Income (or QBI).
These rules were fleshed out very late in the game, so many companies are scrambling to change their tax reporting at the last minute, and that in turn results in evolving dividend breakdowns reported on your individual Form 1099s.
Most of the changes we’re seeing involve Line 5 of Form 1099-DIV. That’s the form reporting your dividend income. Line 5 was newly added in response to the Tax Cuts and Jobs Act, and summarizes what’s now called Section 199A qualified dividends paid by a Real Estate Investment Trust (or REIT), which are eligible for the 20% QBI tax break.
In most cases, the top line items on the 1099 form (dividends paid) have not changed, so the impact upon your tax return is likely minimal.
The Takeaway: We understand how annoying these last-minute changes can be. For that reason, we’ve tried to rush copies of the corrected 1099 forms to our client’s tax preparers as soon as we receive them. Our advice is always to bring these corrections to your tax expert’s attention, and let them decide what action, if any, is needed.