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I generally have my taxes done by mid January when my W-2 becomes available, but I'm often stuck waiting as long as another month before I can file because I'm waiting for my brokerages to send me my 1099s. This happens across TD Ameritrade, Options House, and Fidelity, so it's not just limited to one bad brokerage.

All of the information that is reported on my 1099s, both for personal and retirement accounts, is available via real time reporting in each brokerage's web interface. There is nothing on a 1099 that shouldn't be available from a simple SQL statement that barely changes from year to year.

I understand why deadlines in February may exist for small businesses doing these calculations by hand. But given that every brokerage's DB and software can obviously handle pulling this information in real time from a production database, why does it take over a month for them to send their 1099s to individuals, even via paperless statements? Is there something additional that needs done before these forms can be sent to clients that requires all of this time, or is this just a matter of bureaucratic inefficiency?

Chris W. Rea
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Nicholas
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2 Answers2

37

There are probably many correct answers to this question, but for most people, the main reason is qualified dividends. To be a qualified dividend (and therefore eligible for lower tax rates), the dividend-paying stock or fund must be held for "more than 60 days during the 121-day period that begins 60 days before the ex-dividend date". Since many stocks and funds pay out dividends at the end of the year, that means it takes until mid- to late February to determine if you held them, and therefore made the dividend qualified. Brokerages don't want to send out 1099s in January and then possibly have to send out revised versions if you decide to sell something that paid a dividend in December that otherwise would have been qualified.

Craig W
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The simple answer is that brokerages have to close the books at the end of the year before they can send out the tax forms (what this entails is off topic for this site). I doubt that printing and mailing the forms takes very long. It is simply the process of reconciling the books so they don't have to send out corrected forms if errors are corrected during that reconciliation process.

NL - SE listen to your users
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