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Tax Tips from Nathan Beemster

Nathan Beemster

March 25, 2019


Nathan Beemster

Where is my 1099? What kind of tax form will I receive? Why is it taking so long to receive my tax forms?

These are questions that trust officers hear each year from clients around the end January. Although we try to educate our clients, tax forms often remain a mystery. Having preemptive discussions with clients about the types of tax documentation they will receive and when they should expect to receive them can make the tax season more bearable.
 
Clients with investment accounts or agency accounts will receive a 1099 if their account earned more than $10 in income. But what does that mean? There are many different 1099 forms and not all are created equal. Trust companies, including ATG Trust, often provide a 1099-DIOB which is a combined tax form containing the 1099-DIV, 1099-INT, 1099-OID and 1099-B information.
 
While most remember the days when 1099s were required to be mailed to account holders by January 31, that is no longer the rule. The IRS allows 1099-DIOBs to be postmarked by February 15th. However, the rules allow for an automatic 30-day extension which is usually requested. This extension pushes the mailing deadline to March 15th.
 
Why does the IRS grant these later mailing dates? Over the past 10 years, there have been numerous changes to the reporting requirements that have made 1099 reporting much more complicated. For example, not all dividends are taxed the same and investment managers must report qualified versus non-qualified dividends paid out during the year. In addition, investment managers have had to assume the role of reporting tax basis for assets sold within an account rather than having the client report it by way of the honor system.
 
While K-1s for S-Corporations are required to be mailed by March 15th, trust K-1s are not required to send them until the trust return is processed. 
 
Therefore, extensions for tax returns are becoming more and more of a reality for the beneficiaries of trusts.
 
Even though trust companies work around the clock to ensure tax information is distributed as quickly as possible, we cannot always get the forms to the client before the traditional tax deadline. This means that despite our hard work, many clients become frustrated as April 15th inches closer.
 
If you have a client who is worried about the tax deadline, you may want to consider encouraging them to file an extension to relieve their anxiety and ensure that their return includes all of the pertinent information from their trust.

Contact a Trust Officer today if your client is having a trust tax issue.