Tax Reporting: How does a trustee-to-trustee transfer differ from a rollover?

A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not considered a rollover. Because there is no distribution to you, the transfer is tax free. Because it is not a rollover, it is not subject to the 1-year waiting period required between rollovers.  Trustee-to-trustee transfers are not required to be reported on Form 1099-R.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Form 1099-R Reporting IRA Rollovers

A rollover occurs when money is distributed from one tax-deferred account and deposited within 60 days to another tax deferred account. There are two types of IRA rollovers: 1) a direct rollover, which occurs when funds are transferred directly from one account to another account by the account custodians/trustees, and 2) a distribution, which is made directly to you and within 60 days you deposit the full amount (including any taxes withheld) into a new IRA or other tax deferred account. The custodian/trustee distributing the funds will issue you a 1099-R reporting the payment/transfer of funds. The code in Box 7 indicates what type of payment was made. The custodian/ trustee receiving the IRA funds will issue a Form 5498 in May reporting the contribution to the receiving IRA account which reports to the IRS that you deposited the money into another IRA.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Report Distribution from Retirement Plan Rolled Directly into an IRA on Form 1099-R

The IRS requires the trustee of an employer-sponsored retirement plan to report a direct rollover to an IRA, treated as a distribution and a subsequent rollover, on Form 1099-R.  The successor trustee is required to report the rollover contribution on IRS Form 5498.  Equity Trust, the administrative manager and trustee for IB’s retirement accounts, provides Form 1099-R directly to you. For a detailed description of Form 1099-R, go to the US Persons and Entities tab located in the Tax Reporting section of the Accounts menu on the IB website.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax reporting: Detailed Information about Forms 1099

Detailed explanations of Forms 1099 may be found on our website under the US Persons and Entities tab.  In addition, refer to instructions included with the specific Form 1099 on the IRS website.

Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.

Tax Reporting: Form 1099 Information

Yes.  IB provides the same information reported to you from your IB accounts on Form 1099 to the Internal Revenue Service (IRS).

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Form 1099 for an Amount Received from a Deceased or Divorced Person's Account

If assets are transferred from an IRA or other qualified plan due to divorce, or you receive inherited IRA distributions due to a death, the IRS requires that you report these amounts.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: When a foreign security is sold, how does IB apply a currency exchange rate?

If the proceeds of a sale are paid in foreign currency, IB must convert the amount to be reported into US dollars. Generally, IB converts the foreign currency on the payment date at the spot rate or by following a reasonable spot rate convention, for example a month-end spot rate or monthly average spot rate. Your Activity Statements reflect the spot rate at the end of the applicable month or year depending upon the statement you are viewing. Interest or dividend payments are converted at the spot rate on day of payment for purposes of Form 1099 reporting.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Bond Sale Transactions that Occur in December but Settle in January

As proceeds are reported on a trade date basis a sale is reportable in the year it is executed not settled. In the case of bond sales which take place in December but which do not settle until the following year, the sale proceeds will be reported in the year of the trade, and accrued interest, if any, will be reported included in the following year’s 1099-INT, when the funds are received in your account.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Are short sales included in gross proceeds on Form 1099-B?

Yes.  Proceeds related to short sales of securities are reported on a trade-date basis in the current year the trade is executed and not the year the sale is covered.  Short sales of options are not reported.  Rules that apply to short sales are complex. Refer to IRS Publication 550, Investment Income and Expenses, and consult your tax advisor for more information on reporting short sales.

 

 In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

Tax Reporting: Equity and Index Options Transactions

Equity options and equity index options are options to buy or sell stock valued by reference to an equity or narrow-based security index.  Proceeds from the sale of equity options, both puts and calls (options that entitle the purchaser to sell or buy equity shares) and equity index options are not required to be reported on Form 1099.   However, proceeds associated with the exercise and assignment of equity options is reportable on Form 1099-B.  Please consult your tax advisor for additional information and guidance in this area.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.

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