In Light Of Dramatic Increase In Tax Forms That Must Be Restated, Schumer Calls For Extended Deadline For Brokerage Firms To Send 1099 Forms To Taxpay

In Light Of Dramatic Increase In Tax Forms That Must Be Restated, Schumer Calls For Extended Deadline For Brokerage Firms To Send 1099 Forms To Taxpayers

An artificially early deadline for financial services firms to distribute 1099 tax reporting forms has resulted in a doubling of forms requiring a correction (i.e., an "amended 1099") in the past four years, U.S. Senator Charles E. Schumer revealed today. These corrected forms arrive weeks later, causing confusion for taxpayers and requiring those who have already filed to refile their tax returns. As a result, Schumer today called for an extension in the deadline for brokerage firms to send 1099 forms to taxpayers in order to help prevent errors and reduce costs and confusion for taxpayers.

Right now, financial services firms are required to send out forms by January 31, but these forms often contain information that must be corrected weeks later when new data becomes available. The amended forms are confusing to taxpayers and cost brokerage firms millions. Schumer announced today he is working on legislation that would extend the deadline from January 31 to February 15th.

"Every year, millions of revised 1099 forms need to be sent to taxpayers," Schumer said. "Not only is this confusing to taxpayers, but it is burdensome to those who have already filed their taxes and now must refile with the amended forms. These amended forms also cost millions in unnecessary expenses. By giving the brokerage firms just two extra weeks, we can significantly reduce the number of forms that need correcting, without affecting taxpayers' ability to file their taxes on time."

The 1099 forms are used to report dividends and interest paid on stocks, mutual funds, and other investments. Due to recent changes in tax laws that govern income from interest and dividends, there has been a significant increase in errors on 1099 forms by brokerage firms that are rushing to get the information out to customers by the January 31 deadline. The problem is that much of the tax data for certain types of cannot be calculated until after the first of the year, leaving data unavailable until late January or early February. Unless brokerage firms receive a waiver from the Internal Revenue Service (which is permitted, but only occasionally granted), they must mail one form to customers by January 31, and then an amended form when the data becomes available. The vast majority of amended forms are already mailed by mid-February.

Since 2003, the number of forms requiring an amended 1099 per year increased from an average of 5 to 8 percent to an average of 13 percent. Some customers who receive an amended 1099 may have to re-file their taxes - and if taxpayers underpaid in their initial return, they could face interest charges and penalties if they do not file again before the April 15 deadline. The main problem with the January 31 deadline, however, is the confusion that duplicate forms create, and the millions in extra expenses that firms must incur to send amended forms - not to mention the tons of wasted paper.

Since most customers with significant dividends and capital gains income are not filing their tax returns by mid-February because they are have more complicated returns and take longer to complete them, providing an additional two weeks for 1099s to be mailed will not slow many down, but will save millions and reduce confusion for taxpayers. The Schumer bill will not change the reporting date for taxpayers whose 1099 forms only include simple interest.

The bill is supported by the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI).

http://schumer.senate.gov/SchumerWebsite/pressroom/record.cfm?id=269601