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Correction to This Article
The headline on a March 7 Business article referred to filing a 1099 form. The 1099 is not filed by a taxpayer; it is sent to the taxpayer, who is to report the information on Form 1040. The article also incorrectly described Form 1099-R as a revised 1099. A revised 1099 will simply be noted as corrected; the 1099-R is actually a report of an annuity paid or a distribution from a personal retirement plan.
Mutual Fund Fun

Filed Your 1099 Form? Just Wait for the Correction

By Jackie Spinner
Washington Post Staff Writer
Sunday, March 7, 2004; Page F10

If you are a mutual fund investor, you may want to wait until the end of the month before filing your tax return.

This is the advice that many accountants and financial planners are giving their clients this year after anticipating and then seeing an upswing in the number of 1099 forms that contain errors. The 1099 is the form that tells a taxpayer how much income -- from freelance work, or dividends and interest -- a fund or brokerage house or individual company has reported to the government as having been received by the taxpayer.

_____  Tax Center _____

Tax Changes Guarantee Surprises
Experts say those most likely to face an unpleasant shock are people in the income range of roughly $75,000 to $400,000.

Filed Your 1099 Form?
If you are a mutual fund investor, you may want to wait until the end of the month before filing your tax return.

Falling Into AMT Trouble
The AMT is expected to loom far larger this year, especially in the Washington region than in lower-tax, lower-cost areas of the country.

_____  Live Discussion _____

Transcript: Michelle Singletary and Sam Serio of the IRS


Special Report:
Find articles about the latest changes; advise about filing your taxes; and online forms and resources.


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Latest Business News
Check Your Portfolio

Changes to the tax law last year slashed the levy on certain dividends to a maximum of 15 percent from 38.6 percent. But brokerage firms and mutual fund companies have had a terrible time figuring out which dividend income qualifies for the break, in part because of a technical error written into the law.

The Internal Revenue Service has attempted to address the mistake with a directive that assumes Congress will ultimately fix the law, easing some of the headache for tax preparers.

But it hasn't stopped the unusually high flow of 1099 forms that have had to be corrected.

"It is what people feared, and there is not much we can do about it," said Patricia McClanahan, director of tax policy at the Securities Industry Association, a trade group in Washington. "It looks like there will be a fair number of corrections."

In a typical year, 5 to 8 percent of 1099 forms get corrected, McClanahan said, adding that she expects the number this year could climb as high as 25 percent. About half of all individual tax returns contain some type of 1099 data, according to the IRS.

"I'll know a lot more in a month," said Peter McKenna, the partner in charge of tax services for Beers & Cutler in Washington, D.C. "People have gotten used to corrected 1099s. It hasn't been unusual in the last couple of years. This is just one more complexity."

Financial firms have until Jan. 31 to send out 1099s. If they subsequently find mistakes based on better assumptions and data, they send out a corrected version, the 1099R. There is no deadline for companies to send out corrected forms. Taxpayers who file a return based on an incorrect 1099 form are required to submit an amended return, which can cost $100 to $200, depending on how much their accountant charges.

That is why many accountants are advising taxpayers simply to wait.


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