If you haven't gotten all of the tax forms from your brokerage, you're not alone. Some of those little slips of paper (reporting your dividend, interest, and other investing income received last year) may come a little later than usual.
Some brokerage firms have gotten permission from the Internal Revenue Service to delay mailing their Forms 1099. Though this may irritate some of the tax early birds, it's probably in your best interest. The brokerages want to delay the mailings long enough to reduce the number of corrected forms they're forced to mail out later.
The Wall Street Journal reported last week that Morgan Stanley
By delaying, the brokerages will lessen the likelihood that investors will have to amend their tax return filings later this year because they received a corrected 1099 reporting new information. If you have gotten a corrected form 1099 in recent years, it's because the numbers have been going up since the recent tax cut lowering the rates on certain dividends.
The problem is currently being caused by a tax law passed last year, in which Congress ordered that 1099 forms report certain tax-exempt income. There's concern that this new reporting requirement will generate more corrections than usual. Congress wanted the IRS to get that information, because although the interest is exempt for most people, it can be taxable for anyone who's forced to pay the alternative minimum tax.
The new items that will be reported on the forms include tax-exempt bond interest, tax-exempt interest dividends from mutual funds, tax-free unit-investment-trust interest and accrued interest received on the sale of a municipal bond. An additional box will show tax-exempt interest subject to the alternative minimum tax.
So the delay will be felt mostly by investors with taxable investments in mutual funds and real estate investment trusts, along with people who earned tax-exempt interest. To the extent that it has thrown a wrench in the works of many mutual fund companies, it could affect other investors as well.
The delay should reduce the number of corrected forms, but it may not eliminate them entirely. So be on the lookout for corrections arriving in your mailbox. If your revised Form 1099 shows a big enough correction or that you owe more tax, you may have to file an amended return.
It's up to you to decide whether it's worth filing an amended return to claim a slightly larger refund. In some cases, the revisions may be so slight that your refund will amount to less than it costs more to pay a tax professional to prepare an amended return. If you're a do-it-yourself taxpayer, keep in mind that you cannot electronically file an amended return, known as a Form 1040X.
If the correction is large, or you owe more tax, it's time to consider amending your return. If you really want to play it safe, put off filing your tax return as long as possible. Or consider filing for an automatic six-month extension. No one wants to drag out the chore any more than necessary, but you certainly don't want to do it twice.
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