Guide To Your USAA Investment Management Company Mutual Fund Forms 1099 For Tax Year 2017

Size: px

Start display at page:

Download "Guide To Your USAA Investment Management Company Mutual Fund Forms 1099 For Tax Year 2017"

Posy Singleton
6 years ago
Views:

1 Guide To Your USAA Investment Management Company Mutual Fund Forms 1099 For Tax Year 2017 We are committed to providing accuracy in reporting tax information related to your USAA mutual fund account(s) and help in understanding how it is used. In this guide you will find helpful information regarding your USAA mutual fund account including a general overview of: tax reporting requirements. methods used to determine reported income from your investments. the way the IRS treats income on your investments. descriptions and explanations of tax forms related to your investments. If applicable to your USAA mutual fund account, you may have received form(s) 1099-DIV and 1099-B. The information provided here is not legal or tax advice. We recommend that you consult your legal and tax advisors if you need advice regarding your specific situation. If a tax advisor prepares your income tax return, we encourage you to include the instructions for recipient when providing copies of your form(s) Tax Return Assistance on usaa.com From the usaa.com home page, navigate to My Tools and select View Documents under the Documents & Forms category to sign up to receive your tax forms electronically in the future. In addition to the information in this guide, on usaa.com/taxes you may: view and print your USAA form(s) learn how to download Form 1099 information into TurboTax. receive a discount on your Federal filing using TurboTax online. read articles on recent tax law changes. access other tools and information to answer general tax questions and help you complete your tax return. link to IRS publications and forms. TurboTax is a registered trademark, and TurboTax Online is a service mark of Intuit Inc. They are used with permission. This document is not legal, tax, or investment advice. Consult your tax and legal advisers regarding your specific situation. 1

2 Mutual Fund 1099 Guide Table of Contents I. Form 1099-DIV... Page 3 a. What is it?... Page 3 b. Who receives it?... Page 3 c. Where is it reported?... Page 3 d. Ordinary Dividends...Page 4 e. Qualified Dividend Income...Page 6 f. Short-Term Captial Gains... Page 7 g. Schedule D...Page 8 h. Long-Term Capital Gains...Page 8 i. Unrecaptured Section 1250 Gain...Page 9 j. Nontaxable Distributions... Page 10 II. Understanding Your IRS Form 1099-B...Page 1 1 a. Reporting Your Trading Activity...Page 15 b. Reporting a Wash Sale...Page 17 2

3 Form 1099-DIV Form 1099-DIV What is it? Form 1099-DIV shows the taxable dividends, capital gain distributions and Section 1250 gains earned throughout the year. It separately reflects the dividend amount that may qualify for capital gains rates. The tax-exempt funds report interest income on Form 1099-DIV. Who receives it? A Form 1099-DIV will be generated for all nonretirement accounts to which federally reportable dividends were paid, except for business accounts and accounts with dividends totaling less than $10 that have no tax withheld. Where is it reported? Generally, you will use IRS form 1040 or 1040A and related schedules to report the distributions shown on Form 1099-DIV, as illustrated on the following pages. FATCA filing requirement If the FATCA filing requirement box is checked, the payer is reporting on this Form 1099 to satisfy its chapter 4 account reporting requirement. You also may have a filing requirement. See the instructions for Form

4 Form 1099-DIV Ordinary Dividends Ordinary dividends primarily are dividends from individual securities and the net interest earned from securities in a mutual fund s portfolio. These dividends may include net short-term capital gain distributions, which generally are taxable as ordinary income and are combined with ordinary dividends on the Form 1099-DIV. The amount is shown in box 1a. Note: Box 1a reflects the total amount of ordinary dividends distributed and is the amount for which you may owe tax, although it may be greater than the amount you actually received. The difference may be due to: federal and foreign income taxes withheld (shown in boxes 4 and 6), and/or the payment of the $10 fee ($2.50/quarter) for the USAA S&P 500 Index Fund Member Shares 4

5 Form 1099-DIV Form 1040 Refer to the IRS instruction book for IRS Form 1040 for more information. It may also be accessed at usaa.com/taxes. Schedule B You must file this schedule if the ordinary dividends that you received totaled over $1,500 or if you received, as a nominee, dividends that actually belong to someone else. Ordinary Dividends, cont d. The amount in box 1a on your Form 1099-DIV should be reported on line 9a of IRS form 1040 or 1040A, and on Schedule B (Form 1040) or Schedule 1 (Form 1040A), as appropriate. 5

6 Form 1099-DIV Form 1040 The amount in box 1a also includes dividends that may qualify for longterm capital gains tax rates. This is known as qualified dividend income. Qualified Dividend Income Box 1b on your Form 1099-DIV separately shows the portion of the amount in box 1a that may be eligible for the lower tax rates. Report the eligible amount on line 9b of form 1040 or 1040A. Tax law specifically prohibits applying the reduced tax rate to certain dividends, such as dividend distributions from money market or bond mutual funds. These dividends are not included in box 1b. See IRS Publication 550 (Investment Income and Expenses) for more information about restrictions and exclusions. An amount shown in box 1b may be ineligible for long-term capital gains rates if the required holding period was not met. You must have held your shares for 61 days during a 121-day holding period that began 60 days before the fund s ex-dividend date. This determination is your responsibility. IRS instructions for forms 1040 and 1040A include an example. 6

7 Form 1099-DIV A C Short-Term Capital Gains Short-term capital gains from mutual funds are net gains from the sale of securities held by the fund for one year or less and generally will be subject to ordinary tax rates. The amount is reflected in the box labeled Short-Term Capital Gains C and also is combined with ordinary dividends in box 1a A. See Ordinary Dividends on page 4 for an illustration of how the amount in box 1a is to be reported. Note: Some funds that generate tax-exempt income may also distribute taxable short-term capital gains, which are shown on Form 1099-DIV. 7

8 Form 1099-DIV Schedule D You must use this schedule to report capital gains and losses not reported directly on IRS Form 1040, line 13. For additional information see IRS Publication 550 and Schedule D instructions. Long-Term Capital Gains Long-term capital gains are net gains from the sale of securities held by the fund for more than one year. Long-term capital gains are shown in box 2a, and you should report them on line 13 of Schedule D (Form 1040), or on line 13 of Form 1040 (line 10 of Form 1040A). Note: Some funds that generate tax-exempt income may also distribute taxable long-term capital gains, which are shown on Form 1099-DIV. 8

9 Form 1099-DIV E Unrecaptured Section 1250 Gain Box 2b E shows the portion of the amount in box 2a that is Unrecaptured Section 1250 Gain, taxed at a rate of up to 25%. Include this amount on line 11 of the worksheet on page D-9 of the instructions for Form 1040 Schedule D. 9

10 Form 1099-DIV Box 3 A Non-Dividend Distributions Non-Dividend distributions Box 3 A this amount represents a return of capital. If you received a Non Dividend distribution from a USAA Mutual Fund, USAA will adjust (reduce) your cost basis, if applicable. 10

11 Understanding Your IRS Form 1099-B IRS Form 1099-B Proceeds from Brokers and Barter Exchange Transactions The amounts indicated in this section of your Tax Information Statement reflects proceeds and basisrelated information (when available) from security transactions such as sales, redemptions, tender offer, maturities, etc. Trade Date versus Settlement Date We report sales of USAA Mutual Funds to the IRS, on a trade date basis, on IRS Form 1099-B. Accordingly, you should report transactions on a trade date basis. Explanation of Information Presented on IRS Form 1099-B for USAA Mutual Funds The IRS Form 1099B includes sections that include a summary page, income tax withheld and trading activity. Summary of Gains and Losses These amounts are for informational purposes. Cost basis totals include only amounts that were available to us. Refer to the appropriate detail pages for more information regarding your redemption activity. Income Tax Withheld from any redemption activity will be reflected here. Trading activity This section is broken up into four categories: (1 ) Category A short-term covered securities where basis is reported to the IRS. (2) Category B short-term noncovered securities where basis is NOT reported to the IRS. (3) Category D long-term covered securities where basis is reported to the IRS. (4) Category E long-term noncovered securities where basis is NOT reported to the IRS. This document is not legal, tax, or investment advice. Consult your tax and legal advisers regarding your specific situation. 11

Understanding Your IRS Form 1099-B (con t) Category A Short-term cost basis reported to the IRS Category B Short-term cost basis NOT reported to the IRS These are your noncovered security trades,

12 Understanding Your IRS Form 1099-B (con t) Category A Short-term cost basis reported to the IRS Category B Short-term cost basis NOT reported to the IRS These are your noncovered security trades, representing securities that were purchased before 2012 and subsequently sold. USAA provides the cost basis information (if available) for noncovered transactions on IRS Form 1099-B for your information only. For noncovered securities, USAA will not report basis information to the IRS. This category is divided into two sections: one for positions with complete basis information and one for transactions with missing basis information. Missing basis information For some mutual fund transactions, where the date of acquisition is unknown or various, you should refer to your historical documents to determine if the transaction s holding period qualifies as long-term or short-term. 12

Understanding Your IRS Form 1099-B (con t) Category D Long-term cost basis reported to the IRS Category E Long-term cost basis NOT reported to the IRS These are your noncovered security trades,

13 Understanding Your IRS Form 1099-B (con t) Category D Long-term cost basis reported to the IRS Category E Long-term cost basis NOT reported to the IRS These are your noncovered security trades, representing securities that were purchased before 2012 and subsequently sold. USAA provides the cost basis information (if available) for noncovered transactions on IRS Form 1099-B for your information only. For noncovered securities, USAA will not report basis information to the IRS. This category is divided into two sections: one for positions with complete basis information and one for transactions with missing basis information. Missing basis information For some mutual fund transactions, where the date of acquisition is unknown or various, you should refer to your historical documents to determine if the transaction s holding period qualifies as long-term or short-term. 13

14 Understanding Your IRS Form 1099-B Each page includes a number of columns displaying details related to each transaction. Date Sold or Disposed - Transactions are reported by trade date and each is reported separately to the IRS. Accordingly, you should report each transaction separately on your tax return to avoid a mismatch with the IRS. Quantity Sold - This amount represents the number of shares sold. Proceeds - Gross proceeds of sale. Date Acquired - This represents the date you acquired the shares and is used to determine your holding period for the purpose of determining short-term or long-term classification. Investments that were held for more than a 12-month period qualify as long-term. Note: For mutual funds purchased before 2012, the only tax accounting method available with USAA is average cost. Please consult your tax advisor before using this or another permissible method. Gain or Loss - This represents the difference between the transactions proceeds and your cost or other basis. An exception to this rule occurs when the transaction was involved in a wash sale causing a loss deferral. Reporting your holding Period Date Acquired - This is used to determine your holding period for the purpose of determining short-term or long-term classification. Investments that were held for more than a 12-month period qualify as long-term. In the event your exact purchase date is not available, the 1099B will reflect: Various - The exact date of each purchase is not known, but basis information is available. You will need to use your statements to determine how many of the shares sold were held for more or less than one year. Unknown - USAA does not know the cost basis information on shares sold. You should refer to historical statements to determine cost basis information and if you cannot obtain the data needed, you should seek professional tax advice to determine how to report your cost basis information to the IRS. 14

15 IRS Form 8949 Beginning for tax year 201 1, trading activity is reported to the IRS using IRS Form 8949, Sales and Other Dispositions of Capital Assets. Totals from this form are entered on the newly revised Schedule D, Capital Gains and Losses. A separate version of IRS Form 8949 will need to be completed for the different transaction types: Reporting your trading activity Category A, short-term covered mutual funds where basis is reported to the IRS. Category B, short-term noncovered mutual funds where basis is NOT reported to the IRS. Category D, long-term covered mutual funds where basis is reported to the IRS. Category E, long-term noncovered mutual funds where basis is NOT reported to the IRS. To assist you with your tax preparation our 1099-B design includes a Supplemental Information section that presents a Summary of Gains and Losses summing up the totals of these four categories. NOTE: USAA does not report carryover losses to the IRS. Even though your IRS Form 1099-B has a gain or loss figure, do not enter a gain or loss figure on IRS Form This will be determined when recapped on Schedule D. The final column on IRS Form 8949 is reserved for any adjustments to your cost basis, such as a disallowed loss due to a wash sale transaction. 15

16 IRS Form 8949 (con t.) Once you have completed IRS Form 8949, the column totals are then entered onto a Schedule D which is where you will find your net gain or loss information. 16

Reporting a Wash Sale A wash sale occurs when you sell an investment at a loss, and repurchase a substantially identical investment with a 61-day period that extends from 30 days before the sale

17 Reporting a Wash Sale A wash sale occurs when you sell an investment at a loss, and repurchase a substantially identical investment with a 61-day period that extends from 30 days before the sale until 30 days after the sale. Losses from wash sales are generally not deductible. Instead, the loss is added to the cost basis of the replacement shares. When a wash sale occurs, the net amount of your proceeds and cost basis figures will not equal the amount in the gain or loss column in the amount of the disallowed loss. Example of Form 1099-B with a wash sale loss disallowed Once you have completed IRS Form 8949, the column totals are entered into a Schedule D and when you combine the columns to determine your gain or loss, your allowable loss (if any) will be reflected in column (h). 17

18 Reporting a Wash Sale (con t.) The Average Cost Basis accounting method simply totals the cost basis of an entire position and divides it by the number of shares to determine an average cost per share. Average Cost Basis Historically, USAA maintained cost basis for mutual funds using the Average Cost Basis (ACB) accounting method. If you have previously sold shares and used another cost basis method on your tax return, then our records will be different from yours. You are still permitted to select an alternate method to average cost when filing your tax return. However, we will only display the average cost for noncovered shares. Reporting Cost Basis using Average Cost In General, the average cost method is only one of several methods available to determine gains and losses when you sell or exchange mutual fund shares. Before using the information for tax reporting purposes, consult your tax advisor to ensure that the average cost basis is appropriate given your specific tax situation. For additional information refer to IRS Publication 564, Mutual Fund Distributions. Gifted, Inherited or Other Transferred shares For shares received as a gift, inheritance, or other form of transfer, special basis determination rules, other than average cost of shares, will apply. IRS Publication 551, Basis of Assets, provides instructions on how to calculate the basis of shares received. Please consult your tax advisor for assistance in calculating your basis in these situations. For more information regarding cost basis for mutual funds, visit usaa.com/taxes. For more information regarding your USAA Tax Documents, please visit usaa.com/taxes or contact one of our Member Service Representatives at Questions regarding your specific tax situation should be directed to your tax and legal advisers. USAA means United Services Automobile Association and its insurance, banking, investment and other companies. Banks Member FDIC. Investments provided by USAA Investment Management Company and USAA Financial Advisors Inc., both registered broker dealers. The contents of this document is not intended to be, and is not, legal or tax advice. The applicable tax law is complex, the penalties for non-compliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisers regarding your specific situation

Tax Year 2017 Form 1099-DIV/B Guide

Tax Year 2017 Form 1099-DIV/B Guide Form 1099 FAQs Q: WHAT SHOULD I DO UPON RECEIVING MY FORM 1099? A: Upon receiving your form please review the data carefully. Also be sure to check the tax identification