Tax Information and Reporting

Year-end Tax forms

For US Persons, IB issues 1099 forms in a consolidated format. Most 1099 forms will appear on one statement rather than as separate forms.

Information reported on the Consolidated Form 1099 is also reported to the IRS and should be reported on your federal tax return. Please consult your tax advisor for proper reporting of all Form 1099 amounts.


Available Online:

Your Consolidated Form 1099, Form 1099 for IRA accounts and Form 5498 for IRA accounts are available to view and print by accessing IB's website, selecting Account Management from the Login menu and then clicking Reports > Tax > Tax Forms.

Consolidated Form 1099 will be available February 15 for the immediately preceding year. Form 1099-R for IRA accounts will be available by January 31 for the immediately preceding year. Form 5498 for IRA accounts will be available by May 31 for the immediately preceding year.

Consolidated Form 1099[ 1099-INT | 1099-OID | 1099-DIV | 1099-B | 1099-MISC ]

Form 1099-INT

Form 1099-INT reports interest income including taxable and tax-exempt interest dividends paid to you during the year.

Line 1 reports interest income, exclusive of U.S. savings bond and U.S. Treasury obligations interest. Interest from U.S. savings bonds and US Treasury obligations is reported in Line 3. If the IRS has notified us that income tax must be withheld on interest income in your account, tax withheld amount will be reported in Line 4.

Interest payments details are part of the supplemental information on the Consolidated 1099

US savings bond and treasury obligation interest is separated for state tax reporting. Interest on these obligations is generally not subject to state tax.

Tax-exempt interest (Line 8) – generally not subject to federal taxation. If you own municipal bonds, then interest on bonds from your home

state is generally not taxed in your home. However, municipal interest from other states is taxed in your home state.

Line 9: Some interest paid by muni bonds is subject to AMT (Alternative minimum tax), amount in box 9 is the amount by which you adjust your taxable income to calculate AMT tax on form 6251.

Accrued interest paid: Provided in supplemental information on consolidated 1099 – reduce the amount of reported interest by interest paid.

Remember: Interest income cannot be reduced by accrued interest paid until the first interest on the same security is received. If a bond with accrued interest paid is purchased in December and the first interest payment is in March, accrued interest paid must be carried over into the following year.

Interest payments received on tax-exempt interest producing securities loaned out are reported as substitute payments in lieu of interest on Form 1099-Misc.

Margin Interest Paid

If you have an IB margin account you may have margin interest expense paid from your account. Margin interest is included as an informational item in your Consolidated 1099. Please consult your tax advisor for the proper treatment and reporting of margin interest paid on your tax return.

Form 1099-OID Original Issue Discount

Form 1099-OID reports the amortization of bond interest on discounted bonds taxable annually. Original Issue Discount (OID) is the difference between an obligation's stated redemption price at maturity and the issue price of the debt instrument.

Interest on bonds sold at a discount at the time that a bond or other debt instrument is issued and accreted annually is called Original Issue Discount or OID. Interest income is recognized and the cost basis of the bond is increased.

The original issue discount (OID) greater than $10 is reportable and Form 1099 OID will be issued.

Line 1: OID – amount computed as OID for year – based on IRS tables

Line 2: Other periodic interest – generally interest paid by a bond as a special payment or received on sale.

Line 6: OID on US Treasury Obligations

Form 1099-DIV Dividend Income

Form 1099-DIV reports ordinary dividends credited to your account during the year, short-term capital gains distributions and total capital gains distributions, as well as non-dividend distributions (return of capital), dividends paid by foreign corporations, mutual funds and money market funds.

Line 1a: All dividends received.

Remember: Money Market funds pay dividends rather than interest.

Line 1b: this line reports the amount ELIGIBLE for qualified dividend treatment. Qualified dividends are taxed at the Long-term Capital Gain (LTCG) tax rate (0%, 15%, & 20%).

Remember: the security paying the dividend must be long in your account for at least 61 days including the date of dividend record to be treated as a qualified dividend. The amount in this box does not consider holding period. Information concerning this is on the dividend report.

Line 2a: Long-term capital gain distributions – usually from mutual funds – reported on schedule D of return and are taxed at long-term capital gain rate.

Line 2b: Un-recaptured sec. 1250 gain

Line 3: Non-dividend distributions – return of capital

Line 5:Investment expenses – expenses of a nonpublicly offered regulated investment company, generally a nonpublicly offered mutual fund. These expenses maybe deductible on the "Other expenses" line on Schedule A (Form 1040) subject to the 2% miscellaneous itemized deduction limitation.

Line 6: Foreign tax paid – foreign tax withheld at the source on dividend payments

Lines 8 & 9: Liquidation distributions - usually from mergers or acquisitions

Line 10: Exempt Interest dividends. Generally dividends paid by tax-exempt bond funds

Line 11: Amount on line 10 used to calculate AMT. Please see explanation in 1099-INT

Dividends declared and not yet paid at year-end are not generally included; however, there is an exception for mutual funds. Any dividend declared by a mutual fund during October, November, or December and paid the following January is reported in the year declared.

Dividend payments received on securities loaned out are reported as substitute payments in lieu of dividends on Form 1099-MISC.

Please see more details in Dividend Report.

All IRS forms are available free of charge at www.IRS.gov/formspubs or by calling the IRS at 800.829.3676 (800-TAX FORM)

Form 1099-B Proceeds From Broker and Barter Exchange Transactions

Form 1099-B reports proceeds from securities transactions including sales of stocks, bonds, short sales, redemptions, tenders and bond maturities. Additionally, profit and loss from futures is also reported on Form 1099-B.

Proceeds from Broker and Barter Exchange Transactions:

1099B reporting is made up of three separate forms:

  • Covered securities with short-term gains or losses,
  • Covered securities with long-term gains or losses, and
  • Uncovered securities.

All of the 1099-B forms contain the same boxes, however not all of the boxes are used on every form.

Box 1b reports the date the security was acquired. For short sales the date of acquisition of the security used to cover the short position is reported. Box 1b will be blank for noncovered securities.

Box 1c reports the date of sale or exchange for the security. For short sales the date shown is the date the security was delivered to close the short sale.

Box 1d reports gross proceeds, less commissions and fees, received sales and short sales of stocks and bonds, other debt obligations, commodities, forward

contracts, mutual funds and other securities. This amount may also be adjusted for certain related options positions.

Box 1e reports cost or other basis of securities sold. This basis may be adjusted for wash sales, related options positions, and corporate actions.

Box 2 indicates whether the gain or loss is long-term or short-term.

Box 3 will be blank for noncovered securities.

Box 4 is the amount of federal income tax withheld from the sale proceeds, if any.

If you check Box 5 and choose to complete boxes 1b, 1e, and 2, you are not subject to penalties under section 6721 or 6722 for failure to report boxes 1b, 1e, and 2 correctly.

If you Do Not check box 5, you are subject to penalties under sections 6721 and 6722 for failure to report boxes 1b, 1e, and 2 correctly even if you are reporting the sale of a noncovered security.

IB does not report amounts for Box 8, 9, and 10.

Box 11 is the aggregate profit or loss of lines 8, 9, and 10 on regulated futures contracts (and options on futures contracts) for the year. Refer to Form 6781 and Instructions for guidance on how to report this amount.

  Covered Securities Uncovered Securities
Broker/dealers vs. Taxpayer Responsibility Broker/dealers report cost basis to IRS and taxpayer on Form 1099-B. Taxpayer will use Form 1099-B data to prepare their tax returns Taxpayer to maintain and report cost basis to IRS.
Equities Acquired on or after January 1, 2011 Acquired prior to January 1, 2011
Mutual funds Acquired on or after January 1, 2012 Acquired prior to January 1, 2012
Fixed income and options Acquired on or after January 1, 2014 Acquired prior to January 1, 2014


Reminder:

  • Beginning on 1/1/14, Bonds and options purchases became covered securities.
  • The details for each 1099B transaction is presented in your Form 8949 worksheet. This provides all the details for each transaction in the format that is required for tax reporting. In addition, transactions not reported to the IRS on Form 1099B, for example option sales in 2013, are included on this worksheet.
  • Each of these reports is specific to the account associated with the report, however the tax code requires you to report on your tax return across all of your accounts. If you hold the same security in multiple accounts and sell it, the gain or loss calculated and reported to the IRS may be different than presented on an account level and must be adjusted.

Form 1099-MISC Miscellaneous Income

Form 1099-MISC reports substitute payments in lieu of dividends and tax-exempt interest received in your account, gross fee income received by advisors, stock loan fees received, and soft-dollar payments.

Line 2 Royalties: Payments of Royalties are generally from investments in natural resource companies.

Line 3 Other income: Stock loan fees earned.

Line 8 Substitute payments in lieu of dividends and interest (PIL): Substitute payments of interest and dividends. These payments replace the normal interest or dividend payment when your security is lent.

Remember: These payments cannot be “netted” with PIL paid on stocks you have borrowed. They also are not interest or dividend payments, but are miscellaneous income and should be treated as such on your tax return. PIL received in lieu of a dividend payments are not eligible to be treated as qualified dividends except under specific circumstances.

Details for fee income received by advisors and brokers as well as margin interest and stock borrow fees paid can be found in your Annual Statement. Details for payments in lieu of dividends or tax-exempt interest appear on your year-end Dividend Statement.

Retirement Accounts


Tax Reporting: Form 1099R - Distributions from IRAs


Form 1099R reports distributions from Traditional, Roth and Rollover IRAs held at IB. The trustee, Delaware Charter Co. (d/b/a Principal Trust Co.) issues these forms on or before 1/31 annually for the prior year.

Amount in box 1 should appear on Page 1 of Form 1040 – line 15A- Taxable amount appears on line 15B. If you have a Traditional IRA, the full amount on line one may not be taxable, refer to form 8606 for more information.

Box 2a reports the amount of your distribution that may be subject to federal income tax. In the case of a direct rollover, the amount reported will be zero. If the distribution is from a Roth IRA, Box 2a is generally left blank. Box 2b indicates the taxable amount is not determined if you made nondeductible contributions or if you received a distribution of all assets in the plan, thereby closing the account. Box 4 is the amount of federal income tax withheld from your distribution.

Box 7 identifies, by code, the type of distribution you received and if the distribution is from a Traditional, SEP or SIMPLE IRA. Some of the more common IRS codes are listed below.

Box 12 reports the amount of state tax withheld.

Box 13 identifies the state and provides the state identification number.

Qualified Charitable Distributions (QCD) distributions from your IRA directly to account – gone for 2014 but if you did, total amount of distribution in box 15A and mark QCD next to it on paper filing. Most tax preparation programs have a box for you to check.

Most common:

Code Distribution Type
1 Early distribution, no known exception (in most cases underage 59.5)
2 Early distribution, exception applies (underage 59.5)
3 Disability
4 Death
7 Normal Distribution

Direct Rollovers

The IRS requires the trustee of an employer-sponsored retirement plan (401(k), 403(b), 457(b), or annuity) to report a direct rollover to a Traditional IRA as a distribution on Form 1099-R. Principal Trust Company, the administrative manager for IB's retirement accounts, will be the successor trustee. In a direct rollover, distributions are generally not taxed.

Trustee-to-Trustee Transfers

A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request is not considered a rollover. There is no distribution to you and the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers. Trustee-to-trustee transfers are not required to be reported on Form 1099-R.

Note: In 2015, "Equity Trust Company" will succeed "Principal Trust" and become the trustee/custodian for tax-advantaged accounts. (i.e IRA, Roth IRA, SEP IRA, 401K and Coverdell Education Saving Accounts etc)

Tax Reporting: 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. Form 5498 also reports the Fair Market Value (FMV) of your IRA account as of year-end.

Please check Box 11 on the form, if you take a required minimum distribution (RMD) for all years after you have attained age 70 1/2. If you attained 70 1/2 years of age or older in the previous tax year, Federal law requires that you begin taking minimum distributions from your Traditional, Rollover or SEP IRA account(s) in the following calendar year.

Plan custodian must distribute 5498s to participants and the IRS no later than May 31 of each calendar year. The timing of this form is due to the fact that contributions for the prior year may be made up to the filing date of your return (April 15). For SEP IRA's contributions maybe made up to the filing date of the return plus extensions.

Tax Reporting: 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: some RICs and REITs do not have calendar fiscal years, please check detail on the website of the investment).

Box 1a reports the total undistributed long-term capital gains, including the amounts in Boxes 1b, 1c and 1d. For individuals, this amount is reported on your IRS Form 1040, US Individual Income Tax Return, Schedule D, Capital Gains and Losses.

Box 1b reports the Section 1250 unrecaptured gain, and 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 1c reflects Section 1202 gain; and Box 1d reflects the collectibles (28%) gain.

Box 2 contains any Federal Income tax paid On the RIC or REIT on this gain in your behalf.

When the fund has paid a tax on the capital gains (Box 2, Form 2439), you are allowed a credit for the tax as it is considered paid by you. You can take this credit, Form 1040 the amount of tax shown on Form 2439 (Box 2). Copy B of Form 2439 should be attached to or scanned for E-filing with your return.

The undistributed capital gains reported on Form 2439 should be reported in addition to any capital gains reported on Form 1099-DIV. Please see details in IRS Publication 550 for reference.

Dividend Report: Annual Dividend Statement

The report details all dividends, payments in lieu of dividends, and return of capital as well as any tax withholding on these amounts paid into your account during the year. Additionally, all dividends reported are summarized by revenue type (regular vs. qualified) to make year-end tax reporting easier. The dividend report is provided for all customers. Dividends will be reported in the base currency of the account.

For U.S, customers should reconcile the dividend report with your Form 1099-Div in consolidated 1099s. For U.S foreign tax credit reporting, dividends are also summarized by source country.

In general, the dividend report is available on or before February 15.

Tax Reporting: Form 8949 Worksheet

Form 8949 Worksheet, Sales and Other Dispositions of Capital Assets Worksheet applies to individuals, trusts, and partnerships. Form 8949 Worksheet reconciles amounts that were reported to you and the IRS on Form 1099-B with the amounts you report on your return.

The Form 8949 worksheet shows trade details for all securities (stocks, options, single stock futures and bonds). Taxpayers report transactions on Form 8949 under one of six categories:

  • Part I-box A: Short-term transactions reported on Form 1099-B with basis reported to the IRS
  • Part I-box B: Short-term transactions reported on Form 1099-B but basis not reported to the IRS
  • Part I-box C: Short-term transaction for which you cannot check box A or B
  • Part II-box D: Long-term transactions reported on Form 1099-B with basis reported to the IRS
  • Part II-box E: Long-term transactions reported on Form 1099-B but basis not reported to the IRS
  • Part II-box F: Long-term transaction for which you cannot check box A or B

The IB 8949 worksheet reports transactions in this format. All attempts have been made to tie the information on these worksheets to your Form 1099-Bs; however discrepancies may exist. For accuracy of information on the Form 8949 worksheet, please review your trading records or consult your tax advisor.

Transactions are paired (sells matched with buys) according to the tax basis declaration method selected in Account Management at time of sale, or using the IB Tax Optimizer lot selection designated at the time of the trade. FIFO is the default methodology. All proceeds are reported net of commissions.

WHFIT Tax Information Statement

Additional information for owners of Widely Held Fixed Investment Trusts (WHFITs) is reported on a separate tax information statement. WHFIT securities include unit investment trusts, royalty trusts, commodity trusts and HOLDRS trusts. IB is required to report all income from WHFITs gross on Forms 1099 to the IRS and to you. In many cases this amount will be more than the actual cash received in your account. In some cases, income may be reported on Form 1099 when no cash distribution was made from the WHFIT. The IRS requires that income be reported in the gross amount, including any expenses deducted by the WHFIT prior to a payment. Income (and expenses) must also be reported based on when it was received or incurred by the WHFIT, and not when it is distributed to shareholders.

The WHFIT tax information statement shows the gross amount reported to you on Forms 1099 (dividends, interest, OID, royalty or principal amounts) as well as expenses, including investment interest, foreign taxes and investment expense that have been withheld by the WHFIT from your payments.

For royalty and commodity WHFITs, only the gross income amounts and net income amounts are reported. For tax information on these WHFITs visit the website for the particular WHFIT security.

The WHFIT Tax Information Statement will be available by March 15 for the immediately preceding tax year. View and print the statement by accessing IB’s website, selecting Account Management from the Login menu and opening Tax Forms in the Report Management menu or the Reports menu.

Canadian NR4 – Statement of Amounts Paid or Credited to Non-Residents of Canada

The NR4 reports Canadian Source income paid to a non-resident of Canada during the year from which Canadian tax has been withheld. The value of Canadian payments reported on your NR4 may differ from the total value of distributions that are shown on your account statements due to return of capital distributions, which are not required to be reported on an NR4, in accordance with Canadian taxation laws.

Investment income including dividends, interest, Canadian unit trust income, mutual fund distributions and capital gains paid by Canadian securities to nonresidents are reported in box 16 or box 26. Canadian tax withheld is reported in box 17 or 27

Canadian tax is withheld at 30%, however a tax treaty may lower this rate.

If you are a US citizen, you also receive a Consolidated 1099 from Interactive Broker (IB). The Consolidated 1099 will report US and foreign source income, sales proceeds and cost basis information for securities received in your IB account. The amount of Canadian tax withheld is also included in Foreign Tax withheld on Form 1099.