Friday, January 27, 2006

Check Your 1099-DIV

E*Trade just made my 2005 tax documents available and I went ahead and downloaded my main broker account 1099 and my 2 kiddie tax account 1099's. The kiddie accounts look great... (almost) tax free income of over $1700!

I start looking over my 1099 and noticed that my non-qualified dividend (i.e. the dividends that get taxed at my marginal rate) amount looks pretty large. I do have a fair number of REITs, but it still looks big. I go ahead and download the detail income report and start looking over where all the non-qualified income comes from.

Here are the big sources of my non-qualified dividends...
- BDV - $1,080 - this is a surprise... it's not a REIT
- FFC - $759 - this is a preferred security closed-end fund
- HRP - $336 - this is a REIT
- SFI - $915 - this is an MREIT... but I know this is wrong
- NFI - $1050 - another MREIT

Now, I look for tax-related press releases for each of these companies and I find something pretty disturbing...
- BDV - 100% qualified - $140 error
- FFC - 30% qualified - $30 error
- HRP - 32% return of capital - $30 error
- SFI - 12.5% qualified & 21% return of capital - $69 error
- NFI - 100% non-qualified - $0 error

Only 1 out of 5 of these were reported properly by E*Trade!!

If I hadn't checked, this error could have cost me $269 in extra taxes. If your 1099 shows any non-qualified dividends, do yourself a favor and verify the information yourself. Let me know if you have any success stories and I'll post them on the blog.


At 5:42 PM, Anonymous Jonathan said...

Good tip, I haven't got my 1099 from Ameritrade yet. How are you going to go about fixing it? Are you going to get them to resend the 1099 or just report it correctly on your return?

At 6:02 AM, Blogger Early Riser said...

I'm going to give E*Trade a few more weeks to get me a corrected 1099. My Merrill Lynch 1099 actually stated that if you own REITS or mutual funds, expect a 1099 revision when more tax information becomes available.

At 12:56 PM, Blogger Lauren jonczak said...

Great post. I am writing a paper on 1099-div so I have been doing as much research as possible, that is how I came across your post. I am glad I did because this has been very helpful. Thanks so much sharing.


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