Tax: Dividends and Distributions: Why is there a difference between my activity statements and what is reported to the IRS on Form 1099?

Form 1099 reporting may result in a disparity between what appears on your monthly and yearly activity statements and what is reported on your Form 1099.  For example, transactions reported on Form 1099 must be reported on the trade date.  Your activity statements may reflect transactions based on the settlement date.  In addition, unlike dividends from individual securities which are taxed in the year dividends are paid, mutual fund distributions declared as payable to shareholders of record in October, November or December and paid in January of the following year are taxable to shareholders based on the record date, and not the payment date. Mutual fund distributions with a December record date and paid in January 2, are reported and taxed as dividend distributions in the year they were declared.  

If you invested in a Widely Held Fixed Investment Trust (WHFIT), amounts reported on your Form 1099 may be different from what you received in cash. Trustees and middlemen are required to report the gross amount attributable to the trust income holder.  Since a WHFIT is treated as a grantor trust, reporting requirements are based on how and when the income was received by the trust entity, rather than how and when it was paid out to you.  WHFIT tax information statements are furnished to the trust income holder and may result in a revised Form 1099.  WHFIT tax information statements will be available by March 15 for the previous tax year. View and print the statement by logging in to Client Portal and selecting Reports > Tax menu item.

Refer to IRS Publication 564, Mutual Fund Distributions, Publication 550, Investment Income and Expenses, and consult your tax advisor.

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.