Taxes

Where can I access my Tax Forms?

To access tax documents, log in to Account Management and select Reports > Tax > Tax Forms. Each tax form will allow you to select View Form. Closed accounts are also still able to log into Account Management.

What is the Form 1099?

Forms 1099 are a series of U.S. tax information returns which report income earned such as interest, dividends, proceeds from securities and commodities sale transactions, and other reportable payments posted to your account during a calendar year. These reports, which are supplied to the IRS, provide information, which should be used in preparing your tax return. For example, dividends and interest, are reported on IRS Form 1040, “U.S. Individual Income Tax Return”, Schedule B. Sales transactions are to be reported on IRS Form 1040, “U.S. Individual Income Tax Return”, Schedule D. The information from these forms is included in your consolidated Form 1099. Information on reporting gains and losses, including determining the cost basis can be obtained by reading IRS Publications 544, “Sales and Other Dispositions of Assets”, and 551, “Basis of Assets”. We recommend you consult your tax professional with specific questions. All of the IRS forms and publications referenced above are available on line at www.IRS.gov/formspubs.

When will I receive my Forms 1099?

By February 15, your consolidated Forms 1099 will be available for the immediately preceding year. We often need to amend and reissue 1099 Forms as additional information becomes available to us. We strongly recommend that you periodically check back for revisions as you prepare and finalize your tax filing. Visit our How-To page for instructions on how to access your forms.

What should I do if my 1099s are not posted in the Tax Forms section of Account Management?

First, you must determine from which account you are missing your consolidated form 1099. Retirement account and educational savings accounts are sent to you by mail, if applicable. If you are missing a consolidated form 1099, verify that you sold shares of stock during the previous tax year for equities or covered a short position opened after 2010 or that you bought or sold futures contracts during that same period or that you received an interest (including interest on free cash) or dividend payment in an account. Once you have reviewed your account activity from the previous tax year, and, you have determined that you should have received a 1099 for an account, please contact our Client Support department with specific details of transactions, including the name of the security, number of shares/contracts, and the trade date. We will research the issue and will advise you once we have concluded our investigation.

How do gross proceeds as reported on Form 1099-B relate to gains or losses?

Gross proceeds alone are not indicative of whether an overall gain or loss was realized from a securities transaction. Gross proceeds report only the sale or maturity of a capital asset, which is reportable to the IRS. The gain or loss for any given transaction is a function of the sales proceeds, the purchase price and allowable transaction costs. Please refer to IRS Publication 550 (on line at IRS.gov) for further guidance. Information relating to each of these items, on an individual transaction basis, is available from both the monthly and annual confirmation statements located in the Statements and Downloads section of Account Management. We have formatted the monthly confirmation statements in MS Money and Quicken, or you can use an Excel Spreadsheet to help with your calculations. If you have trouble with downloading your statements, please contact our Client Support team. For certain securities purchased after 2010 we will report tax basis information on Form 1099-B. ZacksTrade cannot provide any assistance in determining transaction gains or losses due to the numerous and often taxpayer specific considerations involved. Please consult with your tax advisor for guidance in this area.

Do gross proceeds reported on Form 1099-B include commissions?

The gross proceeds balance is net of commissions and is included.

Does the gross proceeds balance in the 1099-B for my securities account include equity and index option transactions?

Equity options and equity index options are options to buy or sell stock valued by reference to an equity or narrow-based security index. Proceeds from the sale of equity options, both puts and calls (options that entitle the purchaser to sell or buy equity shares) and equity index options are not required to be reported on Form 1099. However, proceeds associated with the exercise and assignment of equity options is reportable on Form 1099-B. Please consult your tax advisor for additional information and guidance in this area.

Does the gross proceeds balance in the 1099-B for my securities account include short sales?

For equity short sales executed on or after January 1, 2011, ZacksTrade reports in the year in which the short position is covered or closed. Short sales executed prior to January 1, 2011 were reported on Form 1099-B in the year of execution.

Does ZacksTrade send the IRS a copy of my 1099s?

ZacksTrade sends an electronic file to the IRS with the same information that was reported to you on Forms 1099.

If I completed Form W-8 will I receive a Form 1099?

All non-U.S. persons and entities are required to complete an IRS Form W-8 to certify their country of tax residence. If you complete Form W-8 you will not receive Form 1099. However, you may receive Form 1042-S which reports interest payments, dividends, and substitute payments in lieu and applicable U.S. tax withholding, thereon, from U.S. securities paid to foreign investors. Refer to IRSPublication 519, US Tax Guide for Aliens, for more information.

Why did I receive a Form 1099-R for my rollover from one IRA to another IRA?

A rollover occurs when money is distributed from one tax-deferred account and deposited within 60 days to another tax deferred account. There are two types of IRA rollovers: 1) a direct rollover, which occurs when funds are transferred directly from one account to another account by the account custodians/trustees, and 2) a distribution, which is made directly to you and within 60 days you deposit the full amount (including any taxes withheld) into a new IRA or other tax deferred account. The custodian/trustee distributing the funds will issue you a 1099-R reporting the payment/transfer of funds. The code in Box 7 indicates what type of payment was made. The custodian/ trustee receiving the IRA funds will issue a Form 5498 in May reporting the contribution to the receiving IRA account which reports to the IRS that you deposited the money into another IRA.

Why did I receive a Form 1099-R for a distribution from my employer's retirement plan that was rolled directly into an IRA?

The IRS requires the trustee of an employer-sponsored retirement plan to report a direct rollover to an IRA, treated as a distribution and a subsequent rollover, on Form 1099-R. The successor trustee is required to report the rollover contribution on IRS Form 5498. Principal Trust Company, the administrative manager and trustee for ZacksTrade’s retirement accounts, provides Form 1099-R directly to you.

Why has "taxable amount not determined" been checked on Form 1099-R, despite a taxable amount being reported?

The IRS requires that we report the full amount of your IRA distribution in Box 1 (Gross distribution). In Box 2a (Taxable amount), we also report the full amount distributed unless you have directly rolled (transferred account to account) your funds to another IRA custodian/trustee. If funds are distributed directly to you we cannot determine the taxable amount, since we do not know whether you have made any non-deductible (after-tax) contributions to this IRA account. Box 2b is checked to indicate that we have not determined the taxable amount. Please consult your tax advisor to determine if you have made any non-deductible (after-tax) contributions to your IRA account, which may lower your taxable amount. Refer to IRS Publication 590, Individual Retirement Arrangements (IRAs), for additional information on figuring taxable and nontaxable amounts, and consult your tax advisor.

What is Form 2439?

Form 2439, “Notice to Shareholder of Undistributed Long–Term Capital Gains”, reports to owners of Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) undistributed capital gains allocable to them. A separate form 2439 will be issued for each investment. These forms will be issued 90 days following the fiscal year end of the RIC or REIT. Note that some RICs and REITs do not have calendar fiscal years, it is best to consult the website of the investment or your tax advisor for specific guidance in this area. Box 1a reports total undistributed long-term capital gains attributable to your ownership of the fund. For individuals, this amount is reported on your IRS Form 1040, US Individual Income Tax Return, Schedule D, Capital Gains and Losses. Box 1b is your allocable portion of the amount included in Box 1a that has been designated as unrecaptured section 1250 gain from the disposition of depreciable real property. For individuals, this amount is entered on your Unrecaptured Section 1250 Gain Worksheet. Box 2 contains any Federal Income tax paid by the RIC or REIT on this gain in your behalf.

What is Form 5498?

Form 5498,”IRA Contribution Information”, is an information form used to report contributions and rollovers to Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs for which Principal Trust Company is custodian. As contributions to these types of tax deferred accounts for the prior year may be made up to the tax filing deadline of April 15, the IRS has established May 31 as the deadline for providing Form 5498.

What is interest income?

Interest income is interest earned or paid to your account, for example from corporate bonds, municipal bonds and unit trusts, for the year. Interest that you receive may either be taxable or non-taxable (tax-exempt) income. Taxable interest includes interest received from bank accounts and tax-exempt money market income. Taxable amounts received from money market funds are reported as dividends. Taxable interest is also received on US Treasury obligations such as Treasury bills, Treasury notes and Treasury bonds, and certain preferred securities. Tax-exempt interest includes exempt-interest dividends from a mutual fund or other regulated investment company (RIC) and interest on state and local government issued municipal bonds. Tax-exempt interest may be subject to the Alternative Minimum Tax (AMT). If you have a bond, note or other debt instrument issued at a discount, part of the original issue discount (OID) may have to be included in income each year as interest as it accrues over the term of the debt instrument. Refer to IRS Publication 1212, Guide to Original Issue Discount Instruments. For general information, refer to IRS Publication 550, Investment Income and Expenses, and consult your tax advisor for more information.

Is the interest from U.S. government obligations such as Treasury bills taxable?

Interest from U.S. obligations such as U.S. Treasury bills, notes and bonds issued by any agency or instrumentality of the United States is subject to federal income tax. Treasury bills generally are short-term issues with maturities not exceeding one year issued at a discount. Interest on a Treasury bill is the difference between the discounted price you originally paid and the face value you receive at maturity (or what you receive if you sell the bill before maturity). No interest payments are received during the life of the bill. Treasury notes and bonds have longer maturities and generally pay interest semi-annually. Refer to IRS Publication 550, Investment Income and Expenses, for further information.

What is Original Issue Discount (OID)?

Original issue discount (OID) is a form of interest on a debt instrument such as a bond or note issued at less than its face amount. The discount is considered additional interest income. A debt instrument generally has OID when the instrument is issued for a price less than its stated redemption price at maturity. OID is the difference between the stated redemption price at maturity and the issue price, and is amortized over the life of the security, recognizing a portion of the discount annually as taxable interest..

What is the difference ordinary vs qualified dividends?

Dividends are paid by corporations, mutual funds, money market funds, and other entities such as REITs. Ordinary dividends include payments from foreign securities such as ADRs and foreign companies and net short-term gains from mutual funds. Dividends that have been reinvested are also included in this amount. Qualified Dividends are distributions which meet the criteria to be subject to a beneficial federal tax rate. In general, qualified dividends are distributions received from U.S. Domestic corporations or qualified foreign corporations where you have owned the investment for more than 61 days before or after the ex dividend date. IRS Publication 550 “Investment Income and Expenses” available free on line at www.IRS.gov and/or your tax professional can assist in determining if your dividends are eligible for the beneficial rate.

What is a Return of Capital?

Return of Capital (ROC) is a distribution paid to fund shareholders in excess of a fund’s current and accumulated earnings and profits. An ROC distribution is generally nontaxable and reduces a shareholder’s cost basis in the investment. If an ROC distribution exceeds a shareholder’s cost basis, then any additional amount is treated as a capital gain. For example: A shareholder buys 1 share of Fund A for $10. Fund A pays a $1 per share ROC distribution. The shareholder’s cost basis in Fund A after the ROC distribution is $9 per share ($10 initial investment less $1 ROC distribution). Refer to IRS Publication 551, Basis of Assets for further information.

Why were foreign taxes withheld from my dividends?

Foreign taxes are withheld on foreign stocks even though the shares are trades and were purchased on a U.S. stock exchange. They are withheld at the source (company) level and remitted to the foreign government, much like U.S. withholding taxes. U.S. taxpayers may receive a tax credit for these foreign taxes on their U.S. Tax returns. Consult your tax professional and refer to IRS Publication 514 “Foreign Tax Credit for Individuals” for more information on this subject.

Should I take the foreign tax paid as a foreign tax credit or as a deduction on my tax return?

Treatment of foreign tax withheld as a foreign tax credit or as a deduction depends upon the tax situation of each shareholder. IRS Publication 514, “Foreign Tax Credit for Individuals” and the instructions for Schedule A “Itemized Deductions” and Form 1116 “Foreign Tax Credit” provide more specific guidance. We also recommend that you consult IRS Publication 514, “Foreign Tax Credit for Individuals”, for additional information on this subject. Please consult your tax professional for any additional information and determination of the appropriate treatment for your tax situation.

What is a capital gain or loss?

Assets held for investment purposes, including as stocks, options and bonds, are classified by the IRS as capital assets. When such assets are sold, a capital gain or loss is realized on the sale. If the capital asset is sold for a price greater than its purchase price, then a capital gain has been realized; if less, then a capital loss has been realized. In determining whether a capital gain or loss has been realized, adjustments to the purchase and sales price may be allowed to recognize certain transaction costs such as commissions and other specific adjustments. Proper determination and recognition of capital gain and loss is important as capital gains may be subject to lower tax rates than other forms of income. Net capital losses are subject to annual limits. The taxation of capital gains and losses are also distinguished by the length of time the asset was held prior to sale. IRS Publication 550, “Investment Income and Expenses” is a good source of information on this topic. It is available free on line at www.IRS.gov/formspubs. We also recommend you consult your tax professional.

What are short-term capital gains?

Short-term capital gains are capital gains earned on the sale of securities held for up to 1 year. The date a security is acquired is the trade date +1 and the date of sale is the trade date.

What are long-term capital gains?

Long-term capital gains are capital gains earned on the sale of securities held for more than 1 year. The date a security is acquired is the trade date +1 and the date of sale is the trade date. Net long-term capital gains are eligible to be taxed at favorable tax rates.

What is the wash sale rule?

The IRS defines a wash sale as a sale of stock or securities at a loss within 30 days before or after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities. A wash sale occurs if you realize a loss on the sale of the security, and then buy a “substantially identical” replacement stock within the 61-day period, and the loss is deferred until the replacement shares are sold. For further information on the wash sale rule, refer to IRS Publication 550, Investment Income and Expenses, the instructions to Schedule D (Form 1040), and consult your tax advisor.

What are the consequences of a wash sale?

Losses from wash sales are not deductible when they occur. Any disallowed loss should be added to the cost basis of the newly acquired security. The disallowed loss will be reflected in the calculation of gain or loss when these shares are sold. If you think you may have entered a wash sale, please consult your tax professional for more information.

When will I receive my K-1 from a Publicly Traded Partnership (PTP), or Royalty Trust?

K-1s are prepared and distributed by the individual partnership or trust. ZacksTrade does not have access to these documents. Most PTPs and Royalty Tusts have investor contact phone lines through which you can obtain this information; additionally many have investor websites from which you can download your information.

Why does ZacksTrade withhold U.S. taxes from my dividends and substitute payments?

US tax law requires the withholding of tax for non-US persons (non-resident aliens) at a rate of 30% on payments of US source stock dividends, short-term capital gain distributions and substitute payments in lieu. You may be eligible for a reduced rate of withholding if there is a treaty in effect between your country of tax residence and the US, and ZacksTrade is able to associate the payment with a valid Form W-8. Refer to IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for more information.

Where is the tax withheld sent?

Form 1042-S reports US source income earned by non-US persons subject to US withholding tax, including interest, dividends, substitute payments in lieu and fees earned (paid to and for account managers) on your account for the year. You may receive multiple 1042-S forms reporting different types of income. This information is also reported to the IRS. Each type of income is reported on a separate form using a code in Box 1. Common codes are: 01) Interest paid by U.S. obligors including the U.S. Treasury 29) Deposit Interest 30) Original issue discount (OID) 06) Dividends paid by U.S. Corporations 06) Dividends paid by U.S. Corporations 34) Substitute payment – Dividends 35) Substitute- payment – Other 50) Other Income Box 2 indicates the amount of income credited to your account of this type, Box 5 the rate at which tax was withheld and Box 7, the amount of U.S. Tax withheld. If the income is exempt from withholding tax a code appears in Box 6.

What is Form 1042-S?

Form 1042-S reports US source income earned by non-US persons subject to US withholding tax, including interest, dividends, substitute payments in lieu and fees earned (paid to and for account managers) on your account for the year. You may receive multiple 1042-S forms reporting different types of income. This information is also reported to the IRS. Each type of income is reported on a separate form using a code in Box 1. Common codes are: 01) Interest paid by U.S. obligors including the U.S. Treasury 29) Deposit Interest 30) Original issue discount (OID) 06) Dividends paid by U.S. Corporations 06) Dividends paid by U.S. Corporations 34) Substitute payment – Dividends 35) Substitute- payment – Other 50) Other Income Box 2 indicates the amount of income credited to your account of this type, Box 5 the rate at which tax was withheld and Box 7, the amount of U.S. Tax withheld. If the income is exempt from withholding tax a code appears in Box 6.

When will I receive my 1042-S forms?

Forms 1042-S are generally made available by March 15 for the previous calendar year.

Can I receive a refund of tax withheld?

In general, amounts withheld for U.S. taxes are non-refundable. However, under certain circumstances, such as an incorrect rate being applied to withhold tax, a refund can be obtained. If you are an individual, file either Form 1040NR, “U.S. Nonresident Alien Income Tax Return” or 1040NR-EZ “U.S. Income Tax Return for Certain Non-Resident Aliens with No Dependents” to obtain a refund. There are similar U. S. forms for trusts and corporations. IRS Publication 515 “Withholding of Tax on Non-Resident Aliens and Foreign Entities” and IRS Publication 519, “U.S. Tax Guide for Aliens”, available free at www.IRS.gov/formspubs provide more information on this subject.