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It's tax time. Where are my tax documents for my investment accounts?

It's tax time. Where are my tax documents for my investment accounts?

January 27, 2023

It’s usually about this time of the year that we receive questions about the tax forms related to investment accounts.  Here’s some information about the most common tax documents that investors receive. 

Note that at Reed Financial Planning Services, LLC, we can discuss how different types of accounts are taxed or how to develop a more tax efficient income plan.  However, we do not complete tax returns or offer specific tax advice.  Please consult a tax professional for specific information regarding your individual situation.

What is a 1099?

Most people are familiar with what a W-2 is, so let’s begin there.  A W-2 is issued by an employer each year to all of their employees.  It clearly outlines the total amount paid along with any deductions and tax withholding that took place.  The employee then provides this document as part of their annual tax filing. 

Investment companies need to report similar information regarding any taxable events in your investment accounts.  They need to provide each account holder with a summary of all taxable activity on the account and clearly outline the kind of activity (distribution, dividends, short or long term capital gains) and any taxes that were withheld at time of distribution.  This information is provided on something called a 1099.  To summarize, a W-2 is used for employment wages whereas a 1099 is used for investment income. 

When is a 1099 issued?

If you have a tax deferred retirement account such as an IRA, 401 or 403(b), the investment company will need to provide you with a 1099 any time there is a taxable event.  Therefore, if you took a withdrawal from a retirement account in 2022, you should receive a 1099 from that investment company.  If you didn’t take any withdrawals from a retirement account in 2022, you wouldn’t have distributions to report and therefore, you would not receive a 1099.   A 1099 for a retirement account is usually issued in January.

Non-retirement accounts work a bit differently.   Examples of non-retirement account are an individual brokerage account or a Joint Tenancy with Right of Survivorship (JTWOS) account.  If the underlying investment that you hold declares any dividends or capital gains distributions during the year, or if there are any transactions on the account where holdings were sold at a gain, you will need to report these transactions and may owe taxes on some or all of the amounts.  This is true whether you have the proceeds sent to you or have them reinvested back into the account.  All of these activities are reported on the account’s 1099.  Non-retirement account 1099’s are issued a bit later, usually in mid-February. 

Important note:  If you moved an account from one investment company to another during 2022, you may end up getting two 1099’s.  One would be for any taxable activity while at the first investment company and another to report any taxable activity after the funds transferred to the new investment company.

How do I get a copy of my 1099?

Investment companies will likely either mail or e-mail it to you. You can also obtain a copy by visiting your investment company’s website and logging into your account.  There is often a section within your account entitled Documents or more specifically, Tax Documents. 

What about a Form 5498?

Some of you may receive something called a form 5498.  This is often not a taxable event, but rather simply a way to document to the IRS that you moved a retirement account from one investment company to another.  Therefore, if you moved your retirement accounts from one investment company to another you will likely receive a 5498.  Provide it to your tax advisor or CPA to see if they need to include it in your tax return

We’re here to help.

Tax season can be stressful.  If you have any questions about your documents, portfolio or income planning, please don’t hesitate to reach out to our office.  We’d be happy to help in any way that we can.   

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