It’s tax season, and like last year, you received a corrected 1099 in the mail from your account’s custodian, such as Charles Schwab. If you already filed your taxes and are just receiving the corrected 1099 online or by mail, there’s no need to panic.
Revised 1099s are commonplace, and in the majority of cases, the custodian isn’t causing the revisions or holding up the process. Custodians are, however, required to issue a corrected 1099—no matter how insignificant the changes are—so they can give account owners the most accurate, up-to-date information for filing their taxes before the April 15 tax deadline.
To produce a 1099, custodians receive and aggregate all available information relating to distributions made from investments in an account during the previous calendar year. This information includes the character of distributions, such as dividends, qualified dividends, interest, capital gains or return of principal. One such investment is a mutual fund, which is often composed of 100s if not 1000s of securities. A diversified portfolio is often made up of 10 or more mutual funds, and if just one of these securities within a mutual fund issues a correction, the 1099 may need to be revised.
If you received a revised/corrected 1099 and already filed your taxes, you may not have to do anything. The revisions might not be meaningful enough to require filing an amended return. The 1099-DIV, related to the characterization of dividends, is the most commonly revised 1099 form. If the revisions end up being significant enough to impact your tax return, then you can always file an amended return with the correct information. If this leads to a refund, then you have three years from your original filing date to file an amended return to receive the refund. If the revision leads to owing more taxes, filing an amended return as soon as possible will save you on interest and penalties.
Waiting until closer to the April 15 deadline to file your taxes reduces the risk of receiving a corrected 1099 and having to file an amended return reflecting the changes.
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Geoff has always enjoyed talking with people about finance, learning about their investments, financial strategy, and business sense. His interest only deepened with time, and what began as a hobby has now become a life-long passion, with an unparalleled passion for continuing education that makes him an expert in many subjects from traditional taxes and investments to business succession planning and executive compensation negotiations.
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