FAQs – Tax

Tax Frequently Asked Questions

When will I receive a 1099?

1099s will be available on February 23rd

Will the cost basis for positions sold in 2016 be available?

Yes. The cost basis for any equities and covered securities (purchased after 1/1/2012) will display on the Form 1099.

Starting in 2011 the IRS mandated the reporting of cost basis for covered securities only on Form 1099-B. A covered security is an equity stock that was acquired on or after January 1, 2011. If you purchased this security at another Broker and moved the position to Lightspeed via ACAT or any other fashion, the cost basis will not be on the1099.

Are options reported on the 1099?

Yes. Option transactions will be made available on your 1099.

What account types receive a 1099?

All individual and joint accounts will receive a 1099 if they are United States citizens or legal residents and had any reportable tax activity for the year.

S-Corporations and Partnerships, if declared as such on form W9, will receive a 1099 for their trading activity. For limited Liability Companies, those who check “S” S Corporation or “P” Partnership on form W9 will receive a 1099.

How does a corporation report earnings when no 1099s are received?

C-Corporations do not receive 1099s but are responsible for reporting any earnings that they receive based on financial statements that the company reports.

What is reported on the different forms?

1099B

  • Sales or redemptions of securities.
  • All sales of full shares regardless of amount will be reported on a Form 1099-B. Fractional shares can be subject to a de minimis reporting if under $20.00.
  • Any foreign tax that was not refunded and any federal income tax under the backup withholding rules regardless of the amount.

1099-DIV

  • Distributions such as dividends, capital gain distributions, or nontaxable distributions that were paid on stock and liquidation distributions.
  • Only amounts of $10.00 or more for distributions paid on stock, or $600 or more for liquidations are required to be reported on the forms.
  • Any foreign tax that was not refunded and any federal income tax under the backup withholding rules regardless of the amount.

1099-INT

  • All interest income in amount greater than $10.00 that is not already reported on other forms will be reported here.
  • Any foreign tax that was not refunded and any federal income tax under the backup withholding rules regardless of the amount.

1099-MISC

  • At least $10.00 in royalties or broker payments in lieu of dividends or tax-exempt interest.
  • Any foreign tax that was not refunded and any federal income tax under the backup withholding rules regardless of the amount.
What is backup withholding?

Backup withholding requirements are governed by the IRS and are required to be enforced by all withholding agents on all nonexempt individuals and entities.

The current backup withholding rate is 28% and may increase to 31% on payments made after December 31, 2012.

Backup withholding is required to be reported on the appropriate form 1099 regardless of the amount withheld. The $10.00 de minimis rule does not apply when backup withholding has occurred.

Additional information can be found at, http://www.irs.gov/pub/irs-pdf/p1335.pdf.

What happens if my account has the wrong Tax Identification Number (TIN) reported on the 1099?

If you receive a form 1099 that has an incorrect TIN, please contact the Relationship Management department. We may need to obtain a new W-9 form to verify your TIN and then have the clearing firm generate a corrected form 1099.

Will cost basis be reported on the form 1099?

Starting in 2011 the IRS mandated the reporting of cost basis for covered securities only on Form 1099-B. A covered security is an equity stock that was acquired on or after January 1, 2011.

How can I correct my cost basis that is reported on my 1099?

If the cost basis information that is reported on your Form 1099-B is incorrect, you can report a correction to the IRS using Form 8949.

Instructions for completing this form can be found on the IRS website at www.irs.gov/instructions.

What is a wash sale?

The IRS does not allow you to deduct losses from sales or trades of stock or securities in a wash sale. A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

  • Buy substantially identical stock or securities,
  • Acquire substantially identical stock or securities in a fully taxable trade,
  • Acquire a contract or option to buy substantially identical stock or securities, or
  • Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.
How are wash sales reported on my 1099?

For transactions that fall under the category of wash sales, the adjusted costs basis is increased by the amount of the disallowed loss.

How do I make a Mark to Market election?

Per IRS rule under section 475(f), a valid mark-to-market election is one that has been made by the due date of the tax return for the year, prior to the year for which the election becomes effective. Please contact Lightspeed after this election has been made with the IRS. Email [email protected] for instructions on how to set this up for your account.

Where can I find additional information?

Several helpful instructions and publications noted below are available from the IRS website, www.irs.gov.

  • 2014 General Instructions
  • 2014 Instructions for Form 1099-B
  • 2014 Instructions for Form 1099-DIV
  • 2014 Instructions for Form 1099-INT and 1099-OID
  • 2014 Instructions for Form 1099-MISC
  • Instructions for Forms 1099-R and 5498
  • Pub 550 Investment Income and Expenses
  • Pub 575 Pension and Annuity Income
  • Cost Basis Reporting Overview and FAQs

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