It’s that time of year again and many of us are gathering information for our tax preparers.
An important part of many clients’ tax files are 1099s, which are annual tax forms that reflect bond interest, stock dividends, other income and the sale of securities that may include capital gains and losses. Separately, Form 1099-R includes tax information for retirement accounts and reflect distributions, transfers and rollovers.
Charles Schwab and other custodians we work with have now released the majority of their 1099s for the 2018 tax year. With client permission, we can generally provide a copy of your 1099s directly to your tax preparer via secure email. If you would like your 1099s sent to your tax preparer and are uncertain if your portfolio team has your request on file, please email or call your team to review or make arrangements.
It has become common for companies and funds to modify their tax reporting after the end of the year. Once a company or fund has provided updated tax information to a custodian, such as Schwab, the custodian will prepare and provide updated 1099s to clients. Unfortunately, only clients receive notices that updates have been released, not Ferguson Wellman or West Bearing. Only if clients inform us of the custodian notice can we then retrieve and provide updated 1099s to tax preparers if needed, which we will do on your behalf.
We have already been informed of changes in income reporting that will trigger the need for modified 1099s for some of our clients. Please be vigilant in watching for updates directly from your custodian to ensure that your tax preparer receives all updates.
Many of our clients who are over age 70 ½ have chosen to make contributions to charities directly from their IRAs. This often makes great tax sense; however, it is important to know that the Form 1099-R, which reports your annual distributions, will not differentiate between the taxable and any qualified charitable distributions. If you have elected to make a qualified charitable distribution, you should maintain records of these distributions and provide this information to your tax preparer for accurate reporting. Please contact your portfolio team if you need assistance with the details of any transactions for 2018.
The Tax Cuts and Jobs Act of 2017 included the most significant change to our tax code in over 30 years. While projections are that six out of seven taxpayers will benefit from the changes, it is important to remember that there are gives and takes. Many deductions have been eliminated, but most will benefit from lower tax rates, higher standard deductions and fewer individuals will be subject to the alternative minimum tax.
Ferguson Wellman and West Bearing can offer you a variety of strategies for tax-efficient investing. Please reach out to your portfolio manager if you have questions about the best approach for your needs and goals.
Any tax or estate planning information in this communication is not intended or written by Ferguson Wellman Capital Management or West Bearing Investments to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any matters addressed herein. And advice in this communication is limited to the conclusions specifically set forth herein and is based on the completeness and accuracy of the stated facts, assumptions and/or representations included. In rendering our advice, we may consider tax authorities that are subject to change, retroactively and/or prospectively, and any such changes could affect the validity of our advice. We will not update our advice for subsequent changes or modifications to the law and regulations, or to the judicial and administrative interpretations thereof.