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Reading Broker Tax Statements

Updated: Feb 1, 2023

2021-March 27th

I realize that not everybody has a stockbroker account.  For those of you who do, listen up!

When your stockbroker sends you a lot of pages, it may be tempting to throw most of them away, but every single page is valuable and should be paid attention to.

Yes, the key pages are the first few summary pages. There are some strange lines on there that can be confusing. Like “Unrecap. Sec. 1250 Gain” or “Section 199A Dividends” or “Specified Private Activity Bond Interest Dividends.” Every one of those and more are categories of special tax treatment and must be reported correctly on your tax return. Just because you don’t know what they are, do not make the mistake of ignoring them. If you do, you do so at the risk of getting an IRS notice later correcting your tax return. (Remember, these are all reported to the IRS, so they are expecting to see you handle this stuff correctly.)

There is usually a page (or more) of the detail making up things like “Dividend Income-Taxable”. I highly encourage you to read through this and familiarize yourself with which stocks are paying you the best dividends and which are not. Use this to discuss some possible changes with your stockbroker.

The section that seems to garner the most confusion is the “1099-B Proceeds From Broker and Barter Exchange Transactions.” There are many sub-sections in there that confuse a lot of folks. How about sections like this… “Report on Form 8949, Part I with Box A Checked. Basis is provided to the IRS” as opposed to … “Report on Form 8949, Part II with Box E checked. Basis is NOT provided to the IRS” What do these mean? Actually, the IRS is just asking you to do their job for them in “auditing” all returns filed by comparing them to information they have on file. They are checking the items “provided to the IRS” against what you report on your return via a “matching program.” Anything that doesn’t match, will most likely generate a notice from the IRS. The items “NOT provided to the IRS” simply means the IRS can not run their matching program on those items. They accept what you report. If you get audited, you will need to provide documentation on those items besides just the broker’s statement.

One of the last items to pay special attention to is usually on one of the very last pages. “Fees and Expenses.” As the owner of the account, this is your chance to hold your Stockbroker accountable. Look closely at this. Remember to take into account the appreciation of assets not currently taxed. A lot of my elderly clients are getting savvy about these fees and are starting to have their accounts changed to have a lower “management fee.” It is the old, “you don’t get what you don’t ask for” rule.

I could go on and on with the wealth of information you will find in these year-end Tax Statements. This is just scratching the surface.

Did you hear? Proverbs 1:5 says, “that the wise man may hear, and increase in learning; that the man of understanding may attain to sound counsel”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.

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