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.