Now you might have another good excuse to procrastinate in filing your tax return.
Some brokerages are seeking more time to mail Form 1099, which spells out a taxpayers investment income in taxable accounts. These forms usually are sent out by the end of January.
This is just the latest wrinkle in what is shaping up to be a tax season where one of the best tax tips is: wait.
The Internal Revenue Service already warned taxpayers that three tax deductions were extended by Congress too late to be printed on this seasons forms. The agency has told electronic filers to wait until Feb. 3 to submit returns if they are claiming one of those deductions, or their return will be rejected. Paper returns claiming these deductions wont be processed until then, either.
Now, delayed 1099s. Thats sure to make for some unhappy taxpayers who like to file early to receive refunds.
This will be a problem for them. Theyre the ones that will be upset about it, said Bob Cassel, director of tax services for Baltimore-Washington Financial Advisors in Columbia, Md.
A 2006 tax law required tax-exempt interest to be reported on 1099s, and at least three of the five largest brokerages have told the IRS they need more time to do that accurately, said Patricia McClanahan, director of tax policy for the Securities Industry and Financial Markets Association.
Its not unusual for brokerages to ask for an 1099 extension, but often they end up not using the extra time, said Travis Larson, a spokesman for the securities industry group. This year will be different, he said.
Extensions can last 30 days, although brokerages dont expect to take that much time, McClanahan said. Morgan Stanley, for instance, told its clients that it will mail out 1099s between Feb. 5 and Feb. 9. It plans to ask for an extension every year.
The requirement to report tax-exempt interest was intended to help the IRS verify income that could be subject to the alternative minimum tax, McClanahan said. The AMT, created decades ago to make sure that the rich dont avoid paying taxes, doesnt allow the same deductions as regular income tax.
Typically, tax-free interest on municipal bonds issued to finance a private project, such as a stadium, is subject to the AMT, Cassel said. Small investors are likely to earn this tax-exempt interest through a mutual fund or a real estate investment trust.
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