Getting Ready For The Upcoming Tax Season

Getting Ready For The Upcoming Tax Season

January 11, 2024

Tax season is approaching and being prepared is the best way to make this tax season your easiest yet. In this blog post, you will find common questions and important information to help you get ready.

Why are there different mailings for 1099-Consolidated Tax Statements?
During the 2023/2024 tax season, LPL will mail 1099 consolidated tax statements in multiple 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 below for a full list of mailing dates. Your original 1099 consolidated tax statement will be mailed shortly after we receive final income reclassification announcements from all securities held in your account. Timing of receiving final income reclassification data may result in your tax statement not arriving on the anticipated February date. In these cases, your 1099 tax statement will be mailed between February 16 and March 15, 2024.

If your 1099 consolidated tax statement is not available on or before February 16, 2024, you’ll have access to a Preliminary 1099-Consolidated Tax Statement. This is an advanced draft only. Data may be incomplete and is subject to change. The preliminary 1099 should not be considered final and should not be used for the purpose of filing a tax return with the IRS or with any state or other regulatory agency. The preliminary form will be available electronically and won’t be mailed. You can access a preliminary 1099-consolidated tax forms statement in Account View.

Income 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 issuers.

Should I file an extension?
It is always a good idea for you to maintain an open line of communication with 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. In addition, if you are expecting to receive your 1099 in the final mailing waves 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 tax professional.

Why did I receive a 1099 Consolidated Tax Statement this year?
You received a 1099 this year because you received more than $10 in taxable income this year in the form of dividend income, interest income, or proceeds from share sales income.

Didn’t I previously receive my 1099-C forms at the end of January? Why did it change?
In the fall of 2008, the IRS recognized there wasn’t sufficient time to make the necessary changes, verify the data, print the forms, and mail them by January 31, so the IRS filing deadline was changed from January 31 to February 15. Additionally, many brokers, including LPL also request a 30-day filing extension which extends the filing date to March 15. However, for clients with the simplest holdings, LPL Financial will mail your 1099 Consolidated Tax Statement shortly after data is finalized, often before March 15

Are there deadlines for taking your RMD each year?
You must satisfy your RMD by December 31 of each year. There’s an IRS provision that applies to the first year in which you must take out a RMD, where the IRS provides you with the option to defer your first RMD to be taken by April 1 of the following year. For example, you turned age 73 in 2024 and are now required by the IRS to take a RMD. You have the option of deferring your first RMD until April 1 of 2025 instead of taking it by December 31 of 2024. If you choose to postpone your first RMD withdrawal to April 1 of 2025, then you will
have to take out a second RMD by December 31 of 2025. Deferring your first RMD will result in you taking two RMD withdrawals within the same tax year, which could potentially cause a taxable issue for you. We recommend that you consult with a tax professional before
implementing this strategy.

How much do I need to take out of my IRA?
Your RMD is calculated by dividing the market value of your IRA as of December 31 of the prior year by your life expectancy factor taken from the IRS’s Uniform Lifetime Table. If you have multiple IRAs, you must calculate your RMD separately for each one, but you may combine your RMD amounts and take a distribution from one IRA or across several IRA accounts (excluding inherited IRAs). Your quarterly statements from LPL include a section specific to your RMD to help you track your year-to-date distributions. We encourage you to meet with your financial professional or tax advisor to evaluate your individual situation and help you make an informed decision about your IRAs and your RMDs.

What action is required on my part?
We cannot make distributions from your IRA without specific directions from you. If you don’t take your RMD in a timely manner, you may be subject to a 25% penalty assessed by the IRS on the amount you should have withdrawn. Please speak to your financial professional
about your RMD and withdrawal options.

I’m older than 70½, can I still make a contribution to my IRA?
Due to the tax law changes contained in the SECURE Act which became effective on January 1, 2020, there is no age limit for making regular contributions to a traditional or Roth IRA.

Corrected Forms: What do I need to know if I receive a corrected tax form in the mail?
After your original 1099 tax statement has been issued, delayed reporting and reclassification from security issuers can sometimes occur, which may result in you receiving corrected 1099 statement. The IRS requires that a corrected form be issued for any adjustments received from the security issuers after your 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.

How to go paperless in Account View 2.0
There are several benefits to you for going paperless with your important documents.

• Get faster access to your documents, including tax forms.
• Peace of mind. eDelivery is more secure.
• Get convenient access to important documents from one location, anytime, anywhere.

For directions on how to set your tax forms to be paperless, please see the below steps. It takes less than 5 minutes to get setup.

1. Login to your account www.myaccountviewonline.com. If you don’t have an Account View profile, you can sign up for one at the link above.
2. Once you are logged into your Account View profile, click on your name in the upper right corner of the screen. Select “Preferences” to navigate to your paperless settings.
3. From there you can choose to either go 100% paperless for all eligible documents or pick and choose which documents you receive by mail delivery.

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 2023/2024 tax season, to meet all IRS deadlines, reduce errors, and reduce the need to mail corrected versions, LPL will mail the 1099 Consolidated Tax Statements in multiple phases. Keep this chart handy to see when your final forms for tax year 2023 will be ready.

  • January 19th                     Form 1099-R & 1099-Q
  • January 19th & 26th        1099 Consolidated Tax Statement (Includes accounts with the simplest tax information and not subject to income reclassification)
  • February 2, 9, 16, & 23   1099 Consolidated Tax Statement (Accounts holding more complex securities, for which issuers provided final tax information after January 26)
  • February 16th                   Preliminary 1099 Consolidated Tax Statement – Draft copy. Includes accounts that will not receive a final 1099 Consolidated Tax Statement until all income data is finalized. Includes tax information that investment companies did not furnish to LPL Financial, the broker of record, in time for the anticipated February mailing deadline
  • March 1st, 8th, & 15th   Preliminary 1099 Consolidated Tax Statement for Accounts holding securities that may be subject to income reclassification Accounts holding securities that provide mortgage-backed income reporting information (AMBIR)

DOWNLOADS

CLICK HERE for the 2023-2024 Tax Guide For Investors

CLICK HERE for the Turbo Tax and HR Block Guide for Investors

CLICK HERE for the 1099 User Manual

For more information on IRS tax filing or extension deadlines, see IRS.gov.