What To Do With Your 1099

Types of 1099's and General Tax Rules

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There are more than a dozen different types of 1099 forms and many are related to investing activities, such as dividends, capital gains, and retirement account (IRA, 401k, 403b) distributions. Questions you'll hear every year related to 1099s include: When will I get my 1099 in the mail? Do I have to file the 1099 with my taxes? Why did I receive a 1099? Does this mean I owe taxes?

The common types of 1099's received by investors include 1099-R, 1099-DIV, 1099-INT and 1099-Q. Here's what they are and what to do with them:

Deadline to Receive 1099 In the Mail

One of the many frustrations of filing taxes is waiting for all of the required forms to arrive in the mail. Without all of your forms, you can't file your taxes and the waiting period can be especially frustrating for taxpayers expecting a refund. If you owe the IRS, however, you're not likely in a big hurry to file.

The due date for 1099 forms is January 31; however, the issuers of the 1099 (i.e. your brokerage firm or mutual fund company) are not required to get them to the IRS until the end of February.

So, when the first of February comes, and you've not received your 1099, you may want to call the issuer to ask about its status and confirm that you are due a 1099. Also, keep in mind reasonable mail delays, such as bad weather.

What To Do With Form 1099-R

This form is required to be sent to you from the custodian of a retirement account, such as an IRA, annuity, pension, profit sharing plan or 401(k) plan, when you've had a distribution of some kind during the tax year. Keep in mind that a distribution does not necessarily mean a cash withdrawal.

What Is a Distribution?

Put simply, a distribution means that money was moved out of the account. Examples of types of distributions include a partial or full cash withdrawal, an IRA rollover or a 1035 exchange from an annuity.

If your distribution is a direct rollover from an employer-sponsored plan, such as a 401(k), you generally do not owe taxes and should also receive Form 5498 explaining it as such.

What Is 1099-DIV?

This form is sent to an investor from a mutual fund company to show a record of all dividends and capital gains paid to the investor during the taxable year. Some investors can get confused with form 1099-DIV because they may not have received any form of cash payment from any dividends or capital gains during the year .

For regular brokerage accounts that are not tax-deferred, the mutual fund may have capital gains when the fund manager sells a stock at a higher price than it was purchased, which generates mutual fund capital gains, which are then passed on to the investor. These gains are usually reinvested in the fund but they are still gains that are taxable .

In tax-deferred accounts, such as IRAs, 401(k)s and annuities, dividend income and capital gains distributions are not taxed while held in respective account.

Do You Need 1099-INT?

Form 1099-INT is sent from institutions, such as banks, to account holders that received interest payments of at least $10 during the tax year. Interest, not to be confused with dividends, is most common in bank savings accounts, Certificates of Deposit, and money market accounts. Interest is added to earned income on the 1040 tax filing form to arrive at total income for the year so it must be reported to the IRS.

Why You May Need 1099-Q

Form 1099-Q is sent to investors who received a distribution from a Coverdell Education Savings Account (ESA) or Section 529 Plan. Generally, taxpayers do not need to pay taxes on distributions that are less than or equal to qualified education expenses .

Bottom Line: Tips On Mutual Fund 1099 Tax Forms

1099 forms are generally sent to both the IRS and to the individual taxpayer from the institution (i.e. mutual fund company or bank) who distributed the dividend, capital gain, interest or cash withdrawal. Therefore it is not always required for the individual to send their copy to the IRS with their tax filing.

However, it is necessary to retain the 1099s and other documents that provide supportive evidence of your taxable and non-taxable activity. In other words, investors should be prepared for tax audits, which will require documentation of your tax filings .

Disclaimer: Consult with your tax specialist about proper tax filing requirements. You may also visit IRS.gov for standard filing procedures. The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

Article Sources

  1. IRS.gov: "IRS Reminds Employers: W-2, W-3, Some Forms 1099-MISC Due Jan 31." Accessed January 29, 2020.

  2. IRS.gov: "About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc." Access January 29, 2020

  3. IRS.gov: "About Form 5498 IRA Contribution Information." Accessed January 29, 2020.

  4. IRS.gov: "About Form 1099-DIV, Dividends and Distributions." Accessed January 29, 2020.

  5. IRS.gov: "Mutual Funds (Costs, Distributions)." Accessed January 29, 2020.

  6. IRS.gov: "A Guide to Common Qualified Plan Requirements." Accessed January 29, 2020.

  7. IRS.gov: "About Form 1099-INT, Interest Income." Accessed January 29, 2020.

  8. IRS.gov: "About Form 1099-Q: Payments from Qualified Education Programs." Accessed January 29, 2020.

  9. eFile.com: "How to Prepare, File a Tax Return With a 1099." Accessed January 29, 2020.