Important information for 2014 tax planning

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1 Notice Important information for 2014 tax planning Tax season is approaching and we would like to make sure that you are aware of important changes you will see as you prepare for 2014 tax reporting. Please review this notice for details. Highlights Refer to our anticipated mailing dates for 2014 tax reporting forms and documents below, provided to assist you with preparation for your tax reporting. Review the new IRS regulatory requirements for Forms 1099 and the associated changes to the Consolidated Form Learn about the newly redesigned, reorganized and enhanced Consolidated Form 1099, and how the various changes will appear on your tax reporting documents. Questions If you have questions about this information, please contact your Financial Advisor or call the phone number listed on your statement. Equity Plan Advisory Services clients (those who use UBS One Source) should call the phone numbers listed on their statements. Please also refer to the separate insert enclosed with your statement that covers additional information on cost basis reporting. UBS tax form mailing dates for 2014 Forms 1099 Please note that the IRS allows 2014 Forms 1099 to be mailed as late as March 15, UBS s first mailing date will be February 15. Please see a schedule of anticipated mailing dates for 2014 forms and information below. Key Mailings Form or document description 1099 Consolidated Statement: First Mailing Includes Forms 1099 for which we do not anticipate additional updates/corrections from the issuers (generally Mutual Fund and Unit Investment Trust (UIT) companies). Final Original Mailing All remaining accounts. Corrected Forms 1099: Includes any late reclassifications of income or capital gain income, updates made to information contained on the form, including SSN/TIN and cost basis updates that are made for accounts that have received an original form. REMIC Statement New for 2014: This is a separate statement you will receive specific to your REMIC, WHFIT and WHMT securities. Postmarked by February 15 Please note: Accounts in the same household may receive their individual Form(s) 1099 in either or both of the mailings. February 28 February 28 March 15

2 Other Important Mailing Dates Form or document description 1099-R: Reports the taxable and non-taxable distributions from IRAs and Qualified Plans for which UBS Financial Services Inc. is the trustee or custodian Q: Reports distributions and transfers out from Coverdell Education Savings Accounts (CESAs) for which UBS Financial Services Inc. is the trustee. Year-End Valuations (YEVs), Form 5498-ESA, Form 5498: YEV The December Statement provides the client with the year-end value of their IRA. YEV Statement If the December Statement value must be revised or the client is of RMD age, a separate Year-End Valuation Statement will be sent ESA Reports contributions and transfers into the client Coverdell Education Savings Accounts (CESAs) Reports individual and rollover contributions made to IRAs, as well as employer and employee contributions for SEP, CODA SEP, and SIMPLE IRAs. Informational Tax Statement: Can be requested for accounts that do not require a Form 1099 (e.g., corporate accounts). These statements are for client use and will not be provided to the IRS A, 480.6B, 480.6C, and 480.6D: 480.6A Reporting for Puerto Rico residents holding Puerto Rico securities B Reporting for Puerto Rico residents holding all Puerto Rico equities and bonds that are subject to withholding (PTAX) C Reporting for non-residents of Puerto Rico who hold in their accounts Puerto Ricobased securities in which taxes were withheld on gross income D This form is for Puerto Rico residents who may be subject to the Alternative Minimum Tax. This form reports interest earned from exempt Puerto Rico mortgage-backed or collateralized mortgage obligations. Postmarked by January 31 January 31 January 7 January 31 April 30 May 31 February 15 February 28 Regulatory and Layout Changes to 2014 Forms 1099 Please review the Internal Revenue Service (IRS) regulated changes to UBS Consolidated Forms 1099 and the samples in the screenshots on the following pages. Form 1099-B Cost basis reporting reminder: certain fixed income securities and options are now reported to the IRS. As previously communicated, UBS and all brokerage firms are required to report cost or other basis information on fixed rate, fixed maturity (simple) debt securities acquired after December 31, 2013 and closing option transactions to the IRS. Market Discount A new column has been introduced for market discount. Amounts in this column represent the portion of sale proceeds that is to be treated as ordinary income when a position is sold Options Marked to Market at year end will be reported in the 1099-B Regulated Futures Contracts section in boxes 8, 9, 10 and 11. Form 1099-INT Now included: Market Discount and Bond Premium For 2014 tax reporting, any amount of accrued market discount (currently recognized if client elects) or amortized bond premium (currently recognized unless client elects not to) for covered tax lots must now be reported on the Form 1099-INT. Accrued Market Discount is reflected in box 10, while amortized Bond Premium is reflected in box 11 of Form 1099-INT. Market Discount The excess of a bond s stated redemption price at maturity over its purchase price, assuming no Original Issue Discount (OID). Bond Premium Generally, the excess of the purchase price of the bond over its stated redemption price at maturity. 2

3 Form 1099-OID Now included: Market Discount and Acquisition Premium The IRS has created new lines for reporting currently recognized market discount and acquisition premium. Accordingly, Form 1099-OID will now contain lines for Market Discount and Acquisition Premium. If there is a bond premium on a taxable bond, the detail will be presented within the interest detail and summarized on Form 1099-INT (covered tax lots), and in a new summary of Adjustments to Interest and OID (noncovered tax lots) described in a subsequent section. Market Discount The excess of the issue price of the bond, plus accreted OID over the purchase price. (See box 5 below.) Acquisition Premium The excess of a debt instrument s adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument s adjusted issue price at that time. (See box 6 below.) Tax-Exempt OID and Tax-Exempt OID on Private Activity Bonds An additional section will be included immediately below the 1099-INT, devoted to tax-exempt OID and taxexempt OID on private activity bonds. The amount of the private activity bonds is a subset of the amount shown for tax-exempt bonds overall OID Original Issue Discount OMB No This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. Form 1099-DIV For 2014 tax reporting, the IRS has not made any changes as compared to reporting for previous years. We have enhanced the Detail for Dividends and Distributions section to identify the country code for occurrences of foreign tax withholding. In addition, a new section has been created that lists by country all income and foreign tax paid in a section titled Foreign Income and Taxes Summary. Please see the Foreign Income and Taxes Summary section of this notice for additional information. 3

4 Redesigned Form 1099 Summary Pages The redesign of the Summary pages has given us the opportunity to implement several enhancements and provide additional tools to assist you in filing your federal income tax return. Summary Information Page 1 This includes 1099-DIV, 1099-MISC, 1099-B Regulated Futures Contracts, and the Summary of Sales Transactions. Summary Information Changes to dividend tax classifications processed after your original tax form is issued for 2014 may require an amended Form Tax information for your mortgage-backed holdings will be sent separately by March 16,

5 Summary Information Page 2 This includes 1099-INT, OID Summary, State Tax Withheld, Adjustments to Interest and OID, and Non Reported Income, Fees, Expenses and Expenditures. Summary Information (Continued) * This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. 5

6 Adjustments to Interest and Original Issue Discount This new section is included on Summary Information page 2. It provides information such as accrued interest paid, as well as other additional adjustments to income on noncovered fixed income holdings. Non Reported Income, Fees, Expenses and Expenditures This new section is included on Summary Information page 2. It provides information such as Other Receipts, Expenses, Opening Transactions (Options), Fees and Payments Received and Income and Adjustments. 6

7 Foreign Income and Taxes Summary This is a new section on the Consolidated Form 1099 which lists by country all income and foreign tax paid. Foreign Income and Taxes Summary This schedule lists all income and foreign tax by country. Foreign withholding from mutual funds is listed in a separate section with a country designation of RIC. 7

8 Mutual Fund and UIT Supplemental Information We have added a section on your Consolidated Form 1099 that may be useful for filing your federal and state tax returns (if applicable). This includes states and the associated percentages for Mutual Funds and UITs. Mutual Funds and UIT Supplemental Information REMIC Statement New for 2014 The Real Estate Mortgage Investment Conduit (REMIC) statement will no longer mail with your Consolidated Form You will now receive a separate statement specific to your REMIC securities by March 15, This material is prepared for informational purposes only. Neither UBS Financial Services Inc. nor its employees provide tax or legal advice. Please consult your tax or legal advisors regarding your particular situation. UBS The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC. UBS Financial Services Inc. ubs.com/fs