Tax Reporting: Types of Forms 1099

We issue a consolidated Form 1099 on or about February 15 annually. Therefore, if you have both a securities and commodities account you may receive 1099s, for each account. Your 1099 reports information such as interest earned, dividends received, payments in lieu, gross proceeds from securities/futures transactions and tax withholding.

If you are a US citizen, green card holder, or legal resident, you will be provided with a consolidated Form 1099 which contains information provided in one or more of the Forms 1099 listed below based upon the activity which has taken place within your account over the calendar year:

Form 1099-INT (Interest Income) reports interest income earned in your account including cash balance interest. Box 1 contains interest income, exclusive of US savings bond and US Treasury obligations interest. Interest from US savings bonds and US Treasury obligations is reported in Box 3. If the IRS has notified us that backup income tax must be withheld on interest income in your account, this amount will be reported in Box 4.

Margin interest paid by you is not reported to the IRS. This amount appears on your year-end statement. Please consult your tax advisor to determine the tax treatment of these payments.

Form 1099-DIV (Dividend Income) reports the total dividend payments credited to your securities account for the calendar year as "Ordinary Dividends" in Box 1a. Box 1b, "Qualified Dividends", are dividends, which are included in Box 1a that MAY be eligible for reduced tax rates. We do not determine if the payments included in Box 1b have met the requirements for the lower tax rates to apply. We only determine that they are payments which may be eligible for the lower tax rates. Please consult your tax advisor, see the Form 1040/1040A instructions, or IRS Publication 550 to determine the appropriate status of these payments. Box 2a “Total Capital Gain Distributions”, reports long-term capital gain distributions from mutual and exchange traded funds. Box 6, "Foreign Tax Withheld", is foreign withholding tax that has been withheld at the source related to dividends paid on American Depository Receipts (ADRs) or on foreign ordinary shares trading in the US. The country to which the tax was paid is listed in Box 7. If the IRS notified us that backup income tax must be withheld on dividends paid to your account, this amount is reported in Box 4.

Dividends that were debited due to short positions (payments in lieu) are not reported to the IRS. Payments in lieu of dividends paid to you are reported on Form 1099-MISC. These amounts also appear on your Annual statement. Please consult your tax advisor to determine the tax treatment of these payments.

Form 1099-Misc (Miscellaneous Income) reports stock loan fees received in Box 3. Gross fee income paid to advisors and gross commissions paid to introducing brokers in Box 7. Box 8 reports substitute payments in lieu of dividends and interest. If we were notified by the IRS that back up withholding was required on your account, tax withheld is reported in Box 4.

Form 1099-OID (Original Issue Discount) reports the amortization of bond interest on discounted bonds which is taxable annually. OID is the excess of an obligation’s stated redemption price at maturity over its issue price. OID is taxable as interest over the life of the obligation. If you hold an OID obligation, generally you must include an amount of OID in your gross income each year you hold the obligation. Obligations that may have OID include bonds, debentures, notes, certificates and other evidence of indebtedness with terms of more than one year.

Box 1 contains the OID on obligations for the part of the year you owned them. Report the amount in Box 1 as interest income on Schedule B of your tax return. However, depending on the type of debt instrument, the issue or acquisition date, and other factors, you may have to figure the correct amount of OID to report on your return. See IRS Publication 1212, Guide to Original Issue Discount (OID) Instruments, for details on how to figure the correct OID. Box 2 contains other interest on OID obligations for the year, which is an amount separate from the OID. If you held the obligation the entire year, report this amount as interest income on Schedule B of your tax return. If you disposed of the obligation or acquired it from another holder during the year, see IRS Publication 550 for reporting instructions. Box 3 shows interest or principal forfeited if you withdrew the money before the maturity date of the obligation. If the IRS has notified us that backup income tax must be withheld on interest income in your account, this amount will be reported in Box 4. Box 6 shows OID on US Treasury obligations for the part of the year you owned them. Report this amount as interest income on your federal income tax return and see IRS Publication 1212 to figure any appropriate adjustments to this amount. Box 6 OID is exempt from state and local income taxes and is NOT included in Box 1.

Form 1099-B (Proceeds from Broker and Barter Exchange) reports proceeds from securities transactions including sales of stocks, bonds, short sales, redemptions, tenders and bond maturities. Additionally, profit and loss from futures is also reported on Form 1099-B.

For 2011, Form 1099-B has undergone significant changes as brokers are required to report acquisition date, cost, short-term or long-term holding period for gains and losses and disallowed wash sales for securities purchased on or after January 1, 2011 for "Covered Securities."

There are now four 1099-B forms included in the Consolidated Forms 1099:

  • Covered Securities with short-term gains or losses

  • Covered Securities with long-term gains or losses

  • Covered Securities - short sales with short term gains or losses

  • Noncovered Securities

All of the different forms 1099-B contain the same boxes, however not all of the boxes may be used on every form.

Box 1a reports the date of sale or exchange for the security. For short sales the date shown is the date the security was delivered to close the short sale.

Box 1b reports the date the security was acquired. For short sales reported is the date of acquisition for the security used to cover the short position. Box 1b will be blank for noncovered securities.

Box 2 reports gross proceeds, less commissions and fees, received from transactions involving sales and short sales of stocks and bonds, other debt obligations, commodities, forward contracts, mutual funds and other securities. This amount may be adjusted for certain related options positions.

Also included in proceeds is cash paid in lieu of fractional shares, received on a corporation's sale of fractional shares resulting from a corporate action (i.e., merger, spin/split-off or exchange). Refer to IRS Publication 550, Investment Income and Expenses, and consult your tax advisor for proper reporting of cash in lieu of fractional shares.

Box 3 reports cost or other basis of securities sold. This basis may be adjusted for certain wash sales, related options positions, and corporate actions. Box 3 will be blank for noncovered securities.

Box 4 is the amount of federal income tax withheld from the sale.

Box 5 shows the amount of nondeductible loss in a wash sale transaction. Only wash sales involving identical covered securities within a single account will be reported. Not all wash sales will be reported. For details on wash sales, see the 2011 Instructions for Schedule D (and Form 8949) Instructions and IRS Publication 550.

Box 8 shows whether the gain or loss is long-term or short-term.

We do not report amounts for Box 10, 11 and 12.

Box 13 is the aggregate profit or loss of lines 10, 11 and 12 on regulated futures contracts (and options on futures contracts) for the year. Refer to Form 6781 and Instructions for guidance on how to report this amount. Box 13 is only completed on the 1099-B for Noncovered Securities.

Specific types of securities are exempt from 1099-B reporting, including:

  • Single stock futures

  • Money market fund redemptions

  • Options expirations

  • Options sales

  • Forex

More sales proceeds detail for stocks and bonds as well as FIFO profit and loss estimates for stock, equity options, single stock futures, Forex, and bonds are on your Form 8949 Worksheet. Gain and loss details for futures are on your Gain/Loss Worksheet for 1256 Contracts.

For 2011 there are several items of 1099-B reporting that should be considered:

Covered securities sold short on or after January 1, 2011 will be reported when the short position is covered. Securities sold short prior to January 1, 2011 were already reported in a previous year and will not be reported when covered.

No specific gain or loss is calculated on Form 1099-B.

All four 1099-B forms must be included with your tax return.

Form 1099-R: If you received distributions and payouts from your retirement accounts, Form 1099-R is is available around January 31.

Note: Detailed explanations of Forms 1099 are available in the Tax Agency Reports section of the US Persons and Entities Tax Reporting section of our website.

Note: In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.