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Narrator: The 1099 is a tax form issued by your brokerage firm to help you report taxable investment income to the IRS.
Almost every financial account is subject to tax reporting, whether it's a bank account, brokerage account, or retirement account if distributions are taken.
Let's walk through the types of accounts that typically generate a 1099 and some of the most important sections of this tax document. We'll also talk about how the information on the form is used, when and how you'll receive it, and the possibility of receiving a corrected 1099.
You'll also learn how to find more resources related to Schwab's Consolidated 1099.
Keep in mind, this is just an overview. If you have specific questions related to your 1099, reach out to a tax professional.
At Schwab, you'll receive what's called a "1099 Composite and Year-End Summary." The composite form simplifies the tax reporting process by consolidating several 1099s into a single document.
For instance, it's likely that the investments in your account, like stocks, bonds, or options, produced income for you during the year. This could be through dividends, interest, or capital gains, which means you'll receive a 1099.
On-screen text: Disclosure: This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions. Please understand these before opening your account.
Narrator: Keep in mind any activity within a tax year that generates income is taxable, even if that information is not reported to you on a tax form, like income from cryptocurrency transactions or rents you receive from a rental property.
In some situations, you may receive a 1099 even if you didn't buy or sell any securities during a given year.
For example, you may hold a mutual fund in your brokerage account. Even if you've held it for years, this fund could pay dividends, interest, and produce capital gains in the current tax year.
This would trigger a 1099.
This document can be overwhelming, so let's focus on three common sections that contain information you may need to include when filing your tax return.
First, look at the 1099-DIV; this section lists any dividend payments from securities, like stocks and ETFs, and capital gains from other securities, like mutual funds.
Second, look at the 1099-INT; this lists interest income that could be generated from securities like Treasuries and certificates of deposit.
Third, look at the 1099-B; this lists realized gains and losses made from buying and selling assets. If you come out of the year with a net profit, you'll likely owe taxes on any realized capital gains.
So, what do you do with these 1099 forms?
You may need to include the information on these forms when filing your tax return. Depending on how you prepare your taxes, you may be able to import the information directly into an online tax preparation software.
Keep in mind, there are other forms that are a part of Schwab's Consolidated 1099 document.
For example, yours may include a 1099-MISC, 1099-OID, and even the Year-End Summary. Any additional information you get on your consolidated 1099 may also need to be included in your tax return, depending on the type of activity or investments in your brokerage account.
Be sure to consult with a tax professional.
Now, when can you expect to receive your 1099?
Schwab generally sends its 1099s in multiple waves.
The first wave is typically sent out at the end of January, and most forms are posted online by the end of February. If you've selected paper delivery, your forms will be mailed shortly thereafter.
If you have multiple brokerage accounts with Schwab, you'll receive a 1099 for each account.
Keep in mind, you may receive a corrected 1099 after the original one has been issued.
This could happen when a security issuer provides your brokerage firm with updated tax information. If this happens, you'll be notified.
Revisions to the 1099 will be clearly highlighted with the word "corrected".
Most corrected 1099s are sent before the April tax filing deadline, but it is possible to receive a corrected 1099 after that too.
If you have already submitted your tax return, you may end up having to file an amended return that includes the corrected information.
Consider working with a tax professional if you need help with that.
Now that you know what the 1099 is, let's talk about how to find it.
Schwab will send your 1099 digitally or as a paper copy in the mail.
You can also find your 1099s on Schwab's online 1099 Dashboard and on the mobile app.
You'll also receive an email notification when your 1099 is ready to view online, or if it has been sent in the mail.
If you signed up to receive an electronic version, you'll receive an email notification.
There are also helpful resources available online in Schwab's Tax Center.
Reporting your investment income on your taxes can be complicated, but understanding the sections of your 1099 and paying attention to income your investments could generate may make it a little less stressful.
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