By now, you should be receiving the last of your 1099 forms from banks and brokerages for tax year 2006. I have all the data that I need to prepare my tax returns. Unfortunately, if I were to do my taxes now I'd only have to do it over later when the CORRECTED 1099 forms arrive. It is a running theme lately, but I can't remember a year when I haven't had to re-figure my taxes due to updated numbers on my tax forms.
For me, the usual suspects are mutual funds (especially foreign funds), Exchange Traded Funds (ETFs), tax-free bonds, and dividend paying stocks. This year, the Internal Revenue Service (IRS) added two new boxes on the 1099-INT form that report tax exempt interest, and the amount of tax exempt interest that is subject to the Alternative Minimum Tax (AMT). For mutual funds, there are four categories of distributions: long-term capital gains, short-term capital gains, dividends and non-qualified dividends. Mutual funds sometimes classify their distributions incorrectly and need to re-classify them properly. ETFs will sometimes declare a distribution in December, but not pay you until January. Unfortunately, you need to pay taxes on these funds in your prior year's taxes. Sometimes, foreign mutual funds need to calculate the foreign taxes paid by the fund. This calculation usually takes a couple of months for them to figure out. Foreign taxes paid can be taken as a credit on your U.S. taxes. And, I've had instances where the broker listed tax-free interest as taxable interest. For dividend paying stocks, I've sometimes seen the dividends characterized incorrectly as non-qualified dividends when they were actually qualified dividends (which have preferential tax treatment).
The corrected 1099 forms are sometimes further corrected. In one case, I didn't get my last 1099 corrected until April! Some of my brokers have already informed their clients that corrected 1099 forms are not expected to be mailed until March. In another case, I can already predict that one of my 1099 forms is incorrect, and I'm already waiting for a correction. These issues are usually resolved by themselves by the brokers or banks, but it often takes them a while. I owe taxes this year, so I probably won't be finishing my taxes until April anyway. For people expecting a refund, it can be a hard call. You want to get your refund back quickly, but you wouldn't want to have to file an amended tax return later...
What do you think?
I Am Not Making This a Priority in My Life
23 hours ago