Tax Reporting: What is the purpose of the Forms 1099?

 

Tax Reporting: U.S. Government Interest on Form 1099-INT

U.S. Government interest is reported separately for state tax reporting purposes.

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: If You Filed Taxes but Did Not Include Information Reported on Form 1099

You will have to file an amended tax return that includes the applicable information as reported on Form 1099. As the IRS verifies the information on your tax returns with the 1099s received from banks, brokers and other sources, you may receive a notice from the IRS indicating that your return was filed without the omitted information. Consult your tax or legal advisor for further information.

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 2439

Form 2439, "Notice to Shareholder of Undistributed Long–Term Capital Gains", reports to owners of Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) undistributed capital gains allocable to them. A separate form 2439 will be issued for each investment. These forms will be issued 90 days following the fiscal year end of the RIC or REIT. Note that some RICs and REITs do not have calendar fiscal years, it is best to consult the website of the investment or your tax advisor for specific guidance in this area.

 

 

Tax Reporting: Reporting 1099 Information to the IRS

IB sends an electronic file to the IRS with the same information that was reported to you on Forms 1099.

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-DIV tax information

Generally, individual investors will need to report Form 1099-DIV information on IRS Form 1040, "U.S. Individual Income Tax Return." Depending on the type of information reported on your Form 1099-DIV, you may need to include with Form 1040 additional forms such as Schedule B, "Interest and Ordinary Dividends" Schedule D, "Capital Gains and Losses." and/or Form 1116, "Foreign Tax Credit." All IRS forms are available online free of charge at www.IRS.gov/formspubs or by calling the IRS at 800.829.3676 (800/TAX FORM).

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: Profit or Loss Realized for Closed Contracts on Form 1099 for Noncovered Securities

Profit or Loss Realized for Closed Contracts on Form 1099 for Noncovered Securities is the aggregate profit or loss recognized over the course of the year from transactions in commodity futures and regulated futures contracts which have been closed, reached final settlement or, in the case of options, expired.

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.

W8 Re-certification

If you are not a U.S. citizen or entity formed within the U.S. and have an account with Interactive Brokers, you are requested to declare your citizenship or country of formation with the US tax authority (IRS). This declaration can be done online by correctly filling out the W-8BEN form. Filling out this form is an easy process that only takes a few minutes. In the short movie below, we show you where to find the W-8BEN in your IB account management and how to fill it out.

If you fail to declare your foreign citizenship or country of formation, and IB does not have a valid W-8BEN form on file, you are presumed to be a US person/entity without a proper tax certification. As a US person/entity, you will be subject to backup withholding at a rate of 28% on interest, dividends, and substitute payments in lieu; as well as gross proceeds. 

Every 3 years the IRS requires a re-certification of the W-8BEN form. IB will ask the beneficial account owner to re-certify their foreign status by re-signing the W8-BEN in order to continue their status as a foreign person and claim the tax treaty benefits. If you experience any problems or have questions regarding the W-8BEN form or how IB handles Non-US persons and entities, select this Tax Information and Reporting link and choose the tab Non-US Persons and Entities or consult the following IRS information page for more details: www.irs.gov/instructions/iw8/ch02.html

IRA: 2016 Tax Reporting

The Internal Revenue Service (IRS) requires certain transaction reporting within the IRA

Tax forms for eligible accounts will be published by January 31 (Form 1099-R) and by May 31 (Form 5498).  These forms display the IRA distributions and IRA contributions made for the previous tax year.

Select from the following for additional information.

What to Expect

Reconciling Transactions

Tax Form Corrections

Understanding Form 1099-R

Understanding Form 5498

 

What To Expect

IRA tax forms do report: deposits, withdrawals, rollovers, conversions, recharacterizations, year end fair market value, and US tax withholding from withdrawals.

IRA tax forms do not report:  cost basis, sale proceeds, payments-in-lieu, dividends, credit interest, debit interest, foreign tax withholding, and trustee-to-trustee transfers.

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Reconciling Transactions

Your Interactive Brokers monthly and annual activity statements list all IRA cash deposits and withdrawals, as well as broker-to-broker asset transfers via ACATS.  The account statements provide the NAV for each transaction. Contribution and distribution tax years and codes do not appear on the activity statements.

In order to obtain specific IRA contribution/distribution designations, contact Customer Service by Chat or Inquiry/Trouble Ticket via Account Management.

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IRA Tax Corrections

Tax correction requests for open IRAs must be received in writing to Interactive Brokers, not Equity Trust Company, through the secure Inquiry/Trouble Ticket via Account Management

For closed IRAs, we kindly ask you to submit correction request using the form available on our website through our Messaging System.

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Understanding Form 1099-R

The IRS requires that any distribution or cash withdrawal taken in the prior year be reported by the account's administrator.  This form reports the IRA distributions made from each IRA account type.

Data displayed is received from the withdrawals, conversions, and recharacterizations in your IRA.  This may include money distributed to another tax-deferred account as a rollover, conversion, or recharacterization.

For explanations about each line item on the form, read the instructions for Participants or contact IB's Customer Service. 

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Understanding Form 5498

The IRS requires that any contribution or cash deposit received in the prior year be reported by the account's administrator.  This form reports the IRA contributions made from each IRA account type.  Generally, the tax form is published by May 31, but may be issued no later than June 30.

The data shown on the form includes the following:

  • 2016 December 31 Fair Market Value
  • 2016 Contributions
  • 2016 Rollover Deposits
  • 2016 Roth Conversions
  • 2016 Recharacterizations
  • 2015 and 2016 SEP Contributions made in 2016

For explanations about each line item on the form, read the instructions for Participants or contact IB's Customer Service. 

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Disclaimer:  IB does not provide tax advice. 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 international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a q

 

IRA: Charitable Donations from IRAs

Übersicht: 

The Protecting Americans from Tax Hikes Acts of 2015 (PATH) was approved by Congress December 16, 2015 made Qualified Charitable Distributions (QCD) a permanent option to fulfill Required Minimum Distribution requirements.  

[Note: We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service before proceeding with a distribution.]

IRA owners 70½ or older may request an IRA distribution direct to a “qualified charity,”  by as much as $100,000 of IRA assets per year.  The following FAQs provide basic answers.

 

Charitable Distributions

What is a Qualified Charitable Distribution (QCD)?

What is a "qualified charity?"

Where can an IRA owner find additional information on QCDs?

Withdrawal Processing

When can I submit my withdrawal?

Can IB customers submit a QCD withdrawal online?

What amount may be withdrawn? Why?

Where are the funds disbursed?

Does the distribution count towards the Required Minimum Distribution (RMD) amount?

Eligible IRA Accounts

Is the Charitable Distribution allowed from all IRAs held at IB?

Are the QCDs allowed from other IRA and retirement plans not held at IB?

QCD Tax Reporting

How is the QCD reported to the IRS?

Can any taxes be withheld from the distribution?

Do federal taxes have to be paid on the distribution?

Does a state or municipal tax have to be paid on the distribution?

 

 

Charitable Distributions

What is a Qualified Charitable Distribution (QCD)?
A distribution from an eligible IRA to an eligible charitable organization from an individual 70 ½ or older.

How to determine if a charity can receive the QCD?
The IRS Exempt Organizations Select Check allows users to "Search for Charities" among a list of organizations eligible to receive tax-deductible charitable contributions.

Where can an IRA owner find additional information on QCDs? Visit Charitable Donations for IRAs for additional information on qualified charitable distributions. See also IRS Publication 590-b.

 

Withdrawal Processing

When can I submit my withdrawal?
The deadline to submit QCD withdrawals from your IB account is December 1.  Although you can take an IRA distribution anytime before the IRS deadline, you must allow enough time trade settlement and withdrawal processing.
 
As third-party withdrawals are subject to manual review by our Compliance department and the review period may vary depending on the nature of the withdrawal request, please allow additional time for the processing of QCDs.  
 

Can IB customers submit a QCD withdrawal online?
Yes.  Requests are processed manually with your completion of the paper form.  Print the IRA Charitable Distribution Form and upload the form to the Account Management Menu's secure Message Center for processing.

For security purposes, the withdrawal request should be initiated by the IRA owner through the secure Message Center located within the Account Management menu.   Click the header Support and Message Center to access the Message Center. 

You may submit and track the request directly with Customer Service using an inquiry ticket.

What amount may be withdrawn? Why?
IB will process the withdrawal for any amount, as long as the account has sufficient available funds. Why? Although the QCD donations to the charity must not exceed $100,000 per year to retain QCD status, charitable gifts may exceed this limit.

Where are the funds disbursed?a
Funds are made payable to the IRS qualified charity and mailed direct to the charity. Only funds disbursed to the charity can be designated from your IRA as a QCD. 

Does the distribution count towards the Required Minimum Distribution (RMD) amount?
Yes

 

Eligible IRA Accounts

Is the Charitable Distribution allowed from all IRAs held at IB?
No, see the list below.  IRA owners should contact a qualified tax advisor about how to preserve QCD tax benefits. Not all distributions are created equal. A tax advisor will be able to assess an IRA owner’s best choice.

Traditional IRA > YES
Rollover IRA > YES
Roth IRA > YES
Inherited IRA > YES, if the beneficiary is at least age 70 1/2
SEP IRA > NO
Education IRA > NO

Are the Charitable Distributions allowed from other IRA and retirement plans not held at IB?
No, not directly.  Retirement plans, employer sponsored SEP IRAs, and Simple IRAs (account classifications not held at IB) are not eligible for a QCD election. IRA owners may be eligible to rollover assets from these plans into a traditional, rollover, or Roth IRA to request a charitable distribution.  IRA owners should contact a qualified tax advisor or their retirement plan administrator.


QCD Tax Reporting

How is the QCD reported to the IRS?
IB will report the charitable distributions on Form 1099-R when issued. See Reports and Dates for 1099 availability dates.

  Can any taxes be withheld from the distribution?
No.

Do federal taxes have to be paid on the distribution?
Generally, federal taxes are not paid with QCDs. But distributions in excess of the IRS limit may be subject to income tax.  IB recommends that customers contact a qualified tax advisor.

Does a state or municipal tax have to be paid on the distribution?
Contact your tax advisor or local tax authority on state and municipal requirements for the distributed amount.

 

Disclaimer:  IB does not provide tax advice. 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 international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.

 

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