GETTING READY FOR THE UPCOMING TAX SEASON

January 13, 2021

GETTING READY FOR THE UPCOMING TAX SEASON

This information is not intended to be a substitute for specific individualized tax advice. We recommend that you discuss your specific tax issues with a qualified tax advisor

Tax Season is approaching and being prepared is the best way to make this tax season your easiest yet. Following are important information and tools to help you get ready. As always, meeting with your financial advisor early and often will ensure your questions are answered, so reach out to your financial advisor today.

Why are there different mailing dates for 1099 Consolidated Statements?

During the 2020/2021 tax season, LPL will mail 1099 consolidated statements in four waves (similar to other major financial firms) to meet all IRS deadlines, reduce errors, and cut down on the need to mail corrected forms.

See “Important Tax Season Mailing Dates”  for a full list of mailing dates. Certain investment types are more likely to experience income reclassification (sometimes referred to as income reallocation) and other adjustments made by issuers each year after original financials are reported, which will result in your tax statement not arriving on the anticipated February 12 date. In these cases, your 1099 tax statement will be mailed between February 19 – March 12, 2021.

Reclassification: What is it and what do I need to know?

Income reclassification (sometimes called income reallocation) is an annual process where security issuers change the tax characterization of distributions that were paid during the tax year. Often, the result of income reclassification is a more favorable tax treatment. The income reclassification process takes place after the end of the tax year, during the first quarter, when security issuers announce their income reclassification for the previous tax year. The income reclassification process affects income distributions you may have received during the previous tax year. The IRS requires final income reclassification to be reported to you on Form 1099.

Please note: Reclassification is an industry-wide activity. All financial industry firms receive reclassified data from the issuers.

Should I file an extension?

It is always a good idea for you to maintain an open line of communication with your financial advisor and your tax advisor throughout the year to ensure the best tax strategy and outcomes for you. This dialogue will help you decide if filing an extension is the best course of action. There are many reasons why filing an extension might make sense for you. For example, the volume of data or complexity of certain transactions inside or outside your account may require additional time to address. Also, if you are expecting to receive your 1099 in the fourth mailing wave in March, it may be reasonable to consider filing an extension to allow sufficient time for your tax advisor to accurately complete your tax return forms.

If you are unsure about your holdings, be sure to discuss them with your financial or tax advisor.

Corrected Forms: What do I need to know if I receive a corrected tax form in the mail?

Further delayed reporting and reclassification from security issuers can sometimes occur with our staggered mailing system, which will result in you receiving corrected 1099 forms after the referenced mailing dates. The IRS requires that a corrected form must be sent for any adjustments received from the security issuers after the original tax form is produced.

Security types most likely to reclassify are:

  •  Regulated investment companies (mutual funds)
  • Unit investment trusts (UITs)
  • Real estate investment trusts (REITs)
  • Widely held fixed investment trusts (WHFITs)

There is not an IRS cutoff or deadline for providing corrected 1099 forms. If you need to file an amended tax return, it’s recommended that you discuss the situation with your tax advisor prior to refiling so they can determine the best course of action based on your individual circumstances.

For more help answering tax season questions and finding additional saving opportunities, contact your financial advisor.

When can I download my documents on TurboTax®?

You will need to have an active AccountView profile to upload your tax data into TurboTax®. Forms will be available for download once all of the forms for your account(s) are available. We recommend you wait to download your tax forms until you have received your tax statements in the mail to compare the data and ensure the TurboTax® download is complete and accurate.

For technical questions, please contact Intuit TurboTax® or visit http://turbotax.intuit.com/support/.

Important Tax Season Mailing Dates

Becoming familiar with the mailing schedule is one of the most important ways to stay organized for tax season. During the 2020 tax season, to meet all IRS deadlines, reduce errors, and reduce the need to mail corrected versions, LPL will be mailing the 1099 Consolidated Statements in four phases.

Click here for a copy of “Important Tax Season Mailing Dates”.

Click here for a copy of “Getting Ready for the Upcoming Tax Season”.

 

 

 

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.