Guide to tax statements: Ameriprise brokerage and managed accounts not part of an IRA or other retirement plan

Transcription

1 Guide to tax statements: Ameriprise brokerage and managed accounts not part of an IRA or other retirement plan Updated: Dec. 14, 2015 Table of Contents Introduction Summary Information statement (includes IRS Forms 1099-DIV, 1099-INT and 1099-MISC and summary information from Forms 1099-B and 1099-OID) Form 1099-B, Proceeds From Broker and Barter Exchange Transactions Form 1099-OID, Original Issue Discount Tax form detail supplemental statements Other Receipts and Reconciliations Fees and Expenses Mutual Fund and UIT Supplemental Information End Notes REMIC & Widely Held Fixed Investment Trusts Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding 1

2 Introduction This guide provides information about tax reporting for nonqualified 1 Ameriprise brokerage or managed accounts (account numbers ending in 133). Statement examples are included to to help you understand your tax reporting. The blue boxes contain information about the statements and are not part of the statements themselves. The payer listed on these tax statements is American Enterprise Investment Services Inc. (AEIS). Your taxpayer identification number (TIN) on these statements will be truncated (only the last 4 digits displayed xxx-xx-1234). Truncating the TIN may assist in protecting you from identity theft. Mailing deadlines February 16, 2016 The mailing deadline for most nonqualified brokerage or managed account tax statements is Feb. 16, ,3,4. They are mailed: Together with tax statements for nonqualified Columbia mutual funds held at Ameriprise, if you have any with reportable activity (account numbers ending in 002). Separately from tax statements for other products that you may own (i.e. annuities, Ameriprise certificates, life insurance policies, IRAs or other retirement accounts, Coverdell Education Savings Accounts, and 529 College Savings Plans). Depending on the investments and activity within your brokerage or managed account(s), your year-end tax statement package may contain any of the following: Summary Information statement 5 which includes: Form 1099-DIV, Dividends and Distributions Form 1099-INT, Interest Income Form 1099-MISC, Miscellaneous Income Regulated Futures Contracts Summary information from Forms 1099-B and 1099-OID Form 1099-B, Proceeds From Broker and Barter Exchange Transactions Form 1099-OID, Original Issue Discount Tax form detail supplemental statement(s) 5 Other supplemental statement(s) New in 2015: California Form 592-B, Resident and Nonresident Withholding Tax Statements (mailed to California residents as applicable) 1 Nonqualified refers to accounts that are not part of an IRA or other retirement plan 2 The IRS mailing deadline is Feb.16, 2016 for Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, and other forms related to an account that could receive Form 1099-B, even if no form 1099-B is required because there were no sales within the account. Form 1099-B reports sales of securities. 3 Tax statement mailing deadlines are delayed to the following business day if they fall on a weekend or legal holiday. 4 We will be using an IRS-granted extension to delay the mailing of tax statements for nonqualified broker-controlled non-traded Real Estate Investment Trusts, Real Estate Mortgage Investment Conduits, and bonds. Tax statements for accounts holding these investments and any associated Ameriprise brokerage or managed accounts and Columbia mutual funds for the same taxpayer will be mailed by March 15, For more information about the Summary Information statement and tax form detail statement(s) see later sections of this guide. 2

3 Note: If at least two-thirds of your total gross income in 2015 was from farming or fishing you may be included in an early tax statement mailing. Farmers and fishermen generally need to make quarterly estimated tax payments in order to be exempt from an IRS penalty. However, they are not subject to a penalty if their tax return is filed and paid in full by the tax due date of March 1. We mail Ameriprise brokerage or managed account and Columbia mutual fund tax statements prior to the Feb. 16, 2016 mailing due date to qualifying individuals. For more information contact your Ameriprise financial advisor. March mailing dates Some tax statements or investments have later IRS mailing deadlines. Additionally, we will be using an IRS-granted extension to delay the mailing of some tax statements. The following mailing deadlines will apply: March 15, 2016 Due to recent tax law changes and the timing of receiving tax information from investment issuer, we will be using an IRS granted extension to delay the mailing of tax statements for the following products within nonqualified brokerage or managed accounts 6 : Broker-controlled non-traded Real Estate Investment Trusts (REITs) Real Estate Mortgage Investment Conduits (REMICs) 7. Bonds Clients affected by the delayed mailing will be sent a notification letter on Feb. 8. We will mail tax statements for all of your Ameriprise brokerage or managed accounts and Columbia mutual funds together in one tax package by March 15. Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding New in 2015: Undocumented trusts, corporations, partnerships, estates, etc., will receive Form 1042-S for dividend and interest payments 8. March 31, 2016 Form 2439, Notice to Shareholders of Undistributed Long-Term Capital Gains This statement is generally sent for only a few mutual fund and Real Estate Mortgage Investment Trust (REIT) investments within a brokerage or managed account. Tax reporting for income less than $10 Tax law provides that if the amount of reportable dividends, interest, OID, or miscellaneous income is less than $10 on an account in a calendar year, we are not required to produce tax reporting for that account on Forms 1099-DIV, 1099-INT, 1099-MISC or 1099-OID or to report the income to the IRS, unless there is backup withholding on the account. Tax reporting, including the Summary Information statement and tax form detail statement(s) will be generated if the account has any of the following: Any income during the year over $10, including: dividend, interest, OID or other income Backup withholding Sales or dispositions requiring Form 1099-B reporting 6 The IRS mailing deadline is Feb.16, 2016 for Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, and other forms related to an account that could receive Form 1099-B, even if no form 1099-B is required because there were no sales within the account. Form 1099-B reports sales of securities. 7 See page 16 for additional details about REMIC statements. 8 See page 17 for additional details about 1042-S statements. 3

4 Note: If tax reporting is required on an account for any income type or to report a sale or disposition, the Summary Information statement will include all forms of income in the account, even those less than $10 and a detail statement will be generated. However, we will only report income of $10 or more to the IRS. Example: Form 1099-DIV divided income is $5 and Form 1099-INT interest income is $20. The Summary Information statement will include both amounts but only the $20 on Form 1099-INT will be reported to the IRS. You can find the interest and/or dividends paid in your account(s) on your monthly or quarterly financial statements and on your annual financial statement which is available exclusively online in late January on the secure site of ameriprise.com > My Accounts > Statements & Documents 9. Updated tax statements Many of the updated tax statements you may get for nonqualified Ameriprise brokerage and managed accounts and Columbia mutual funds are due to income reclassification. Brokerdealers like Ameriprise Financial, receive income reclassifications and other similar adjustments from mutual funds or companies that issue stock after year-end statements have mailed. If updates to your tax information are necessary after your year-end tax statements have been produced: Updated or new tax statement(s) will be issued. We will mail you only the tax statement (s) being updated or any new tax statement(s). If you previously received other 2015 tax statements that don t require a correction they will not be re-sent to you. The word CORRECTED will be printed on the Table of Contents and at the top of the statement. C will also appear next to the dollar amount that was updated within the statement. For more information please take a look at the following articles: Investment types most likely to reclassify Corrected tax statements and income reclassification If you own an investment likely to reclassify you may want to delay filing your tax returns until late March or early April to avoid re-filing. Work with a qualified tax professional to determine how amended tax statements may affect your tax returns. Contact If you have questions or need to make corrections to your tax statements, please contact Service Delivery at and say Brokerage Trades or SPS Trades at the prompt. 9 Amount(s) on your financial statements and tax statements may be different due to various potential adjustments (for example, income reclassification, wash sales, and market discount). 4

5 Summary Information statement Some tax statements and supplemental information for nonqualified brokerage accounts are displayed together on a two page document called the Summary Information statement. The Summary Information statement is divided into various income sections which correspond to tax statements or detail pages found later in the tax package. The various sections include information, as applicable 10. The sections that contain information we report to the IRS are marked with an * on the statement. See the following pages for more details. 10 Tax law provides that if the amount of reportable income is less than $10 on an account in a calendar year, we are not required to produce tax reporting for that account on Forms 1099-DIV, 1099-INT, 1099-MISC or 1099-OID or to report the income to the IRS, unless there is backup withholding on the account. For more information see the Introduction section on page 3 of this guide. 5

6 Summary Information statement continued Regulated Futures Contracts (Lines 8-11) contains profit and loss information for regulated futures contracts, if applicable. This information is part of Form 1099-B and is reported to the IRS. Sales Transactions contains a summary of proceeds, gains, losses, adjustments, and withholding from proceeds within the account, if applicable. Every holding period category is displayed, regardless of the activity within the account. This summary information is not reported to the IRS. Refer to Form 1099-B, found later within the tax package, to see information that is reported to the IRS. Back to top > 6

7 Summary Information statement - continued Form 1099-INT, Interest Income New in 2015: Line 13 reports bond premium on tax-exempt bonds Line 14 reports tax-exempt and tax credit bond CUSIP. This information is reported to the IRS. Adjustments to Interest and Original Issue Discount Bond premium, accrued interest, nonqualified interest, and market discount in this section display 0.00 for all lots. We are unable to provide this information. Please consult your own records and work with a qualified tax professional to determine how to calculate and report this information on your tax returns. Acquisition premium - Tax-exempt obligations (all lots) and Acquisition premium - Tax-exempt obligations (AMT, all lots) lines may be populated, if applicable, for covered tax lots only. Original Issue Discount Income Summary contains totals for the transaction detail information on Form 1099-OID. The totals are not reported to the IRS. This section has lines to report Market discount and Total acquisition premium, if any for covered OID bonds 11. The dollar amount in the Market discount (covered lots) line is the total of amounts found on Line 5 of Form 1099-OID (Note: This line will display $0.00 ifyou are using the broker default, recognition at sale or maturity, for market discount) The dollar amount in the Acquisition premium (total for covered lots categorized below) line is the total of amounts found on Line 6 of Form 1099-OID (Note: Acquisition premium for Non-Treasury obligations and Treasury obligations is displayed separately underneath the total). 11 Cost basis reporting regulations, for covered bonds, were implemented for less complex bonds and options purchased starting on Jan. 1, In 2015 the IRS changed the broker default for market discount computation method to constant yield. For more information on covered and noncovered securities, cost basis reporting requirements, and bond elections see Cost basis reporting FAQ on ameriprise.com/taxcenter. Back to top > 7

8 Form 1099-B, Proceeds From Broker and Barter Exchange Transactions Form 1099-B may have up to five holding period categories depending on how long the assets have been in the account and availability of data for noncovered tax lots: Short-Term Transactions (NONCOVERED) 12 Short-Term Transactions (COVERED) Long-Term Transactions (NONCOVERED) Long-Term Transactions (COVERED) Undetermined Term Transactions (NONCOVERED) 13 Each holding period category identifies the investment, quantity, date sold, proceeds and, if known, date acquired, cost or other basis, and gain or loss information. We ve sent and will continue to send the information on proceeds from the sales of investments to you and to the IRS when applicable. The tax statement will include notations to indicate which information is reported to the IRS. For example, gain and loss information is not reported to the IRS for either covered or noncovered securities. For all investments, we report proceeds, date sold or disposed, CUSIP, description, and quantity. For covered investments, we also report cost or other basis, term of gain or loss (date acquired and holding period) and any adjustments from wash sales or market discount. Gain/loss amounts are not reported to the IRS. Cost basis reporting For noncovered investments, cost basis information is provided as informational only and may not incorporate all basis adjustments. You may need to adjust the numbers we provide, for example, in the case of wash sales, which may or may not have been calculated. Review these records for accuracy and work with a tax professional to report these transactions appropriately. Under the cost basis rules for mutual funds, the average cost basis calculation is calculated separately for covered and noncovered tax lots within the same mutual fund account. Original and adjusted cost basis on tax statements Cost basis on some tax lots may be adjusted due to various reasons (for example income reclassification, wash sales and market discount). If any adjustments have been made, we report the adjusted amount on column 1e Cost or other basis of Form 1099-B. For tax lots with adjusted basis, we also provide the original basis amount in the Additional information column of the statement. The original basis amount displayed in the Additional Information column is not reported to the IRS. 12 Investments, which became covered more than one year ago, such as stocks and mutual funds, will generally not be reported in this category. 13 The undetermined category is for assets for which some of the information is missing in our files, especially if we don t know the acquisition date. You will need to consult your own investment records and work with a qualified tax professional to determine how to report these transactions on your tax returns. Back to top > 8

9 Form 1099-B continued Income Tax Withheld Tax withholding is not reported with the rest of the transaction information, but in a separate section of our Form 1099-B, called Income Tax Withheld. This section will be present only if there is federal or state income tax withholding on the sales or redemptions reported on Form 1099-B. Reporting aggregate tax lots When a single sale includes multiple tax lots of the same investment, holding period (short-term or long-term), covered status and sale date, the tax lots will be combined within the appropriate holding period and covered status category and reported as an aggregate total on Form 1099-B with Date acquired listed as Various. The underlying individual tax lots are provided above the combined totals without a Date sold or disposed. In this case we report only the aggregate totals to the IRS. Only use either the supporting details or the aggregate totals when preparing your tax returns. Using both numbers would result in double reporting. Income Tax Withheld section is displayed for transactions that had withholding. Aggregate tax lot reporting 9

10 Form 1099-OID, Original Issue Discount Form 1099-OID reports the amount of accrued original issue discount (OID) attributable to a discounted taxable debt obligation. We are required to report OID by CUSIP on a separate Form 1099-OID for each investment you own. The information on Form 1099-OID is reported to the IRS, unless otherwise indicated, and should be used when preparing your tax returns. A summary of Form 1099-OID information is found on the Summary Information statement discussed earlier. Form 1099-OID reports the following information on covered tax lots per IRS mandatory cost basis requirements for bonds. Line 5, Market discount: Reports the market discount that accrued during the year while you held the bond, if you have chosen the annual inclusion of market discount election. This line will report 0.00 if the broker default for market discount is used. Line 6, Acquisition premium: Reports the amount of acquisition premium amortization for the year. Back to top > 10

11 Tax form detail supplemental statements The tax form detail statements provide the supplemental transactional details for the totals listed on the Summary Information statement. The information on the tax form detail statements is not reported to the IRS. Depending on investments and activity in your brokerage or managed accounts you may receive one or more of the following 14 : Detail for Dividends and Distributions displays: Individual dividend payments in the account by CUSIP Applicable federal, state, or foreign tax withholding Tax-exempt dividends Detail for Interest Income displays: Individual interest payments in the account by CUSIP Accrued interest paid on purchase transactions and/or Accrued interest received on sale transactions, if applicable Applicable federal, state, or foreign tax withholding Interest payments from mortgage pools (previously reported on Form 1099-OID, REMIC) Detail for Tax-Exempt Interest displays: Transaction detail for tax-exempt interest which is reported on Form 1099-INT, Line 8 Detail for Miscellaneous Income displays: Transaction details of miscellaneous income (i.e., royalty distributions and miscellaneous substitute payments) which are reported on Form 1099-MISC Detail for Tax-Exempt OID, Original Issue Discount displays: Original issue discount, Market discount and acquisition premium for tax-exempt bonds New in 2015: Supplemental Information for Widely Held Mortgage Trusts displays: Transactional details of income, principal, total proceeds and tax withheld for Widely Held Mortgage Trust investments. New in 2015: Supplemental information for REMICs and Widely Held Fixed Investment Trusts Transactional information by CUSIP for REMIC investments Details of premium accrual Details of income paid and received 14 Tax law provides that if the amount of reportable income is less than $10 on an account in a calendar year, we are not required to produce tax reporting for that account on Forms 1099-DIV, 1099-INT, 1099-MISC or 1099-OID or to report the income to the IRS, unless there is backup withholding on the account. For more information see the Introduction section on page 3 of this guide. 11

12 Other Receipts and Reconciliations This supplemental statement provides details for limited partnership distributions and other similar transactions. We don t report the information on this statement to the IRS. You can expect to receive a Schedule K-1, Partner s Share of Current Year Income, Deductions, Credits, etc. statement directly from the partnership filing Form 1065 (U.S. Return of Partnership Income) which contains information reported to the IRS. For more information go to Sponsor controlled partnership investments: Tax reporting from the partnership 12

13 Fees and Expenses This supplemental statement contains information about management and wrap fees in your brokerage or managed account. In addition, it may also include, when applicable, other fees incurred and/or payments received, in which are generally adjustments to the income distributed from an investment. This statement also provides information about applicable investment expenses that come out of account income, for example margin interest. We don t report the information on this statement to the IRS. You may use this information to report fees, payments, and investment expenses on your tax return, if applicable. Some payments received are applicable to certain security types only per the table below: Description on tax statement Applicable security types(s) Addition to Cost Basis Unit Investment Trusts (UITs)/Royalty Trusts Foreign Exchange Fee For Depository American Depository Receipts (ADRs) Receipts Tax-Exempt Investment Expense UITs Option Premium Payment Investments such as convertible and reverse convertible bonds Difference Between Reportable & UITs Distributed Amounts - UIT Reduction to Cost Basis UITs/Royalty Trusts Reversal of Prior Year Income Accrual UIT UITs Recognized Prior Year UIT UITs Unpaid Income Accrual UIT UITs Some fees and payments that are not provided on this statement (for example custodial fees) are displayed on the monthly or quarterly financial statements and on the annual financial statement which is available exclusively online in late January on the secure site of ameriprise.com > My Accounts > Statements & Documents. The tax treatment of brokerage fees, payments and expenses depends on many factors. Consult a qualified tax advisor to determine the current tax treatment deductibility of any fees or expenses. Back to top > 13

14 Mutual Fund and UIT Supplemental Information This supplemental statement provides detail for mutual fund distributions reported on Form 1099-DIV. The name, CUSIP, and ticker symbol of the investment are listed at the top of the statement. The statement may contain up to three of the following detail section, included as relevant for the investment: Tax-exempt interest dividends by state and U.S. Possessions Displays only the states or U.S possessions for which a particular investment had an allocation Provides percentage of exempt-interest dividends produced by obligations of that state or U.S possession The portion of dividends derived from interest and original issue discount on state and local obligations is federally tax-exempt, but may be subject to alternative minimum tax (AMT) or state and local taxation. Most states do not tax the portion of exempt-interest dividends attributable to their own obligations, but restrictions may apply in some states. Work with a qualified tax professional to accurately report this information on your tax return. Foreign source income percentages Displays the percentage of ordinary dividends from foreign sources and the percentage that is qualified or adjusted, if applicable. Percentage of income from U.S. Government securities Displays a portion of dividends derived from interest on certain federal obligations (not including Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA) for example) which may be exempt from state and local tax. If the investment provides agency-by-agency breakdown, this information will also be included. The information is not reported to the IRS but may be used in preparation of your state tax returns, if applicable. Consult a qualified tax advisor for more information. 14

15 End Notes There is a separate End Notes page for each account within the tax package, which displays the notes that are referenced throughout the tax statements for that account. There are a variety of end notes for various statement types and account transactions. Only the end notes that pertain to the account display on this page. End note codes are generally located in the Notes column of the statement. However, some of the codes may be displayed in other locations in the statement. Example: Code 24 in the Notes column on the supplemental statement Detail for Dividend Distributions corresponds to the message on the End Notes page for the account. 15

16 REMIC & Widely Held Fixed Investment Trusts Real Estate Mortgage Investment Conduits (REMICs) investments are subject to accelerated repayments of principal and may have paid or accrued reportable interest. REMIC investments have a March 15, 2016 IRS tax statement mailing deadline. New in 2015: If you own REMICs with 2015 reportable activity in your brokerage accounts you will not receive your year-end tax package in February. We will use an IRS-granted extension to deliver all of your 2015 year-end tax statements together in one package along with your REMIC reporting. Your year-end tax package mailed in March will include the following for your nonqualified accounts: Tax statements for mutual funds held outside of a brokerage account 15 Summary Information statements for any brokerage or managed accounts Any applicable supplemental statements for your investments or activity Supplemental statement REMICs and Widely Held Fixed Investment Trusts o Provides the transactional details by CUSIP for each REMIC you own in your account(s). o The supplemental information is not reported to the IRS. Note: A sample of the REMIC statement will be added in mid-march when it is available. 15 Tax law provides that if the amount of reportable income is less than $10 on an account in a calendar year, we are not required to produce tax reporting for that account on Forms 1099-DIV, 1099-INT, 1099-MISC or 1099-OID or to report the income to the IRS, unless there is backup withholding on the account. For more information see the Introduction section on page 3 of this guide. 16

17 Form 1042-S, Foreign Person s U.S. Source Income Subject to Withholding Form 1042-S is generally issued to a nonresident alien or other foreign person, for any taxable or reportable events that happen during the year. A nonresident alien (NRA) individual is someone who is not a U.S. citizen or resident. New in 2015: Per the provisions of the Foreign Account Tax Compliance Act (FATCA), entities such as trusts, corporations, partnerships, estates, etc., (not individual clients) who did not provide Ameriprise with a certified Taxpayer Identification Number (TIN) within 30 days of opening a new nonqualified brokerage or managed account will: Be treated as foreign entities for FATCA purposes Be subject to withholding under Chapter 4 of the Internal Revenue Code Receive Form 1042-S by March 15, 2016 to report income and associated Chapter 4 withholding. Form 1042-S has been modified to accommodate new reporting requirements. Depending on activity within your account may also receive applicable 1099 Forms which will report sale proceeds, cost basis information, and income. Note: U.S. entity clients affected by the FATCA reporting changes will be sent a notification letter in mid-february. For more information on resident and nonresident alien status, see IRS Publication 519, U.S. Tax Guide for Aliens at Ameriprise Financial Inc., and its affiliates do not offer tax or legal advice. Clients should consult with a tax advisor or attorney regarding their specific situation. Brokerage, investment and financial advisory services made available through Ameriprise Financial Services, Inc., Member FINRA and SIPC. Margin lending and brokerage clearing services provided by American Enterprise Investment Services, Inc. Ameriprise Financial Services, Inc., Member FINRA and SIPC Ameriprise Financial, Inc. All rights reserved. 17