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Account Custodians and Tax Forms

By February 20, 2024Custodians, Resources, Tax


“ … but in this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin


Most of us are not excited about the prospect of paying taxes every spring — but, perhaps in hopes of getting an unpleasant task out of the way early, every year in mid-January we begin to hear questions from some clients about the tax forms associated with their investment accounts. While we at Horizons can sometimes provide some preliminary and very rough estimates, it’s the responsibility of the custodians who actually hold your accounts (Charles Schwab and Folio / Goldman, primarily) to provide these forms.

For most of our clients, there are two main tax forms coming from the custodians: the “Form 1099-R” details the distributions made from retirement accounts in the previous year, and the “Consolidated 1099” shows the dividends, interest, capital gains, and other taxable transactions made within taxable brokerage accounts.

The 1099-R forms are relatively easy for our custodians to produce: they only need to count up all of the dollars that departed our retirement accounts during the year. This uncomplicated accounting is done very early in January, and the forms are delivered electronically or dropped into the mail by January 15th. If you are expecting 1099-R forms for this past year, but haven’t yet received them, please let us know right away so that we can help track them down.

Composite 1099s, on the other hand, take longer to produce. They have to report all of the transactions that took place within our brokerage accounts, and make sure that they’re categorized correctly and allocated accurately. The last round of dividends and so on from December can be paid on the 31st, technically, but sometimes can’t be applied to our accounts until later in January, so the custodians don’t really get to work on the forms until the end of the month. The initial versions of the Composite 1099s are usually delivered to clients by about February 15th … but those are usually just the first drafts, sent out as early as possible in order to meet Federal reporting requirements. In recent years, they have been followed by two revised versions.

The first round of revisions normally arrives toward the end of February, maybe the first week of March. These first revisions are often due to changes made to the “Foreign Tax Paid” box, prompted by changes in the way certain transactions are categorized in and reported by non-US stocks and stock funds. The second round of revisions normally arrives before March 15th, and is primarily due to the reporting of “Section 199A” dividends from the REIT (“real estate investment trust”) funds in our portfolios. Both non-US stocks and REITs are included in almost all of our clients’ portfolios, because of the significant diversification benefits they provide — and as a result, almost all of our clients with taxable brokerage accounts will receive revised 1099s. It’s worth checking with your tax advisors, but because of these revisions it may be a good idea to wait until the second half of March to complete your taxes.

The calendar of distribution of these forms (for Schwab and for Folio), and the fact of the revisions, can cause a lot of frustration — but it’s something we deal with every year, and there’s not a lot we can do about it, short of a complete overhaul of the US Tax Code. Then again … that might be worth doing, for all sorts of reasons! In the meanwhile, we’re sorry for the hassle and delay, and we will do whatever we can to make the process go as smoothly as possible for you. Please give us a call if you have questions, comments, or concerns; we’re happy to help you however we can.