Line items on Schedule B

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Line items on Schedule B

Postby richard » Sat Mar 23, 2013 9:56 am

A) How to report tax-exempt interest or dividends on a Federal Schedule B (e.g., federal tax exempt national fund)

1) Don't report zero amount items
2) Report on one line, naming the payer and listing the amount as zero
3) Report on two lines, naming the payer and listing the amounts as zero (recommended approach for Turbo Tax when only a portion of the dividend is exempt from state tax).

B) How to report interest or dividends from a single payer or related payers if there are multiple accounts. For example, a Citibank checking account and Citibank savings account

1) Report on one line with the total (Citi summarizes the accounts on the 1099)
2) Report on two lines, one line per account (Citi also includes this on the 1099)

The IRS doesn't go much beyond the instruction to "list name of payer" which doesn't really address any of these issues. http://www.irs.gov/pub/irs-pdf/f1040sb.pdf

There have been prior discussions of some of these issues, none of which came to any definitive conclusion.

So far as I can tell, any of these approaches are acceptable under the rules as written and in practice.

Anyone have another view?
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Re: Line items on Schedule B

Postby livesoft » Sat Mar 23, 2013 10:00 am

All I do is match what the 1099 says.

I get a 1099 from TDAmeritrade that says "First Clearing" is the payor, so I put First Clearing on the tax form. Actually, TurboTax puts FirstClearing on the tax form.

But if it has $0.01 in tax-exempt interest, I even round down to $0.00 and put zero on the return.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Line items on Schedule B

Postby sscritic » Sat Mar 23, 2013 10:11 am

Vanguard sent me a 1099-DIV with tax-exempt interest on it (yes, that goes on a 1099-DIV for 2012). Vanguard lists each fund separately. Each fund goes on its own line in Part II, Ordinary Dividends (they were reported on a 1099-DIV, after all). The amount is zero for each fund reporting tax-exempt interest.
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Re: Line items on Schedule B

Postby MarkNYC » Sat Mar 23, 2013 1:20 pm

livesoft wrote:All I do is match what the 1099 says.

I get a 1099 from TDAmeritrade that says "First Clearing" is the payor, so I put First Clearing on the tax form. Actually, TurboTax puts FirstClearing on the tax form.

Many brokerage account 1099s show a clearing agent as the payer, such as First Clearing, Pershing, or National Financial Services. The Schedule B line instructions say to list the "name of the payer," but in the left hand margin of the form it says to list the name of the brokerage firm as payer. Both methods are commonly used and I've never known the IRS to send out a notice questioning the payer name so apparently they are able to match the two.
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Re: Line items on Schedule B

Postby HouseStark » Sat Mar 23, 2013 3:31 pm

MarkNYC wrote:
livesoft wrote:All I do is match what the 1099 says.

I get a 1099 from TDAmeritrade that says "First Clearing" is the payor, so I put First Clearing on the tax form. Actually, TurboTax puts FirstClearing on the tax form.

Many brokerage account 1099s show a clearing agent as the payer, such as First Clearing, Pershing, or National Financial Services. The Schedule B line instructions say to list the "name of the payer," but in the left hand margin of the form it says to list the name of the brokerage firm as payer. Both methods are commonly used and I've never known the IRS to send out a notice questioning the payer name so apparently they are able to match the two.


I believe that when it says to list the name of the "brokerage firm" as payer, they are referring to using the brokerage name instead of using the names of the stock or fund which are paying the dividends as the payer, not to using the brokerage name verses using the clearing firm name, which is the actual payer listed on the 1099. As a tax preparer, I use the payer name as listed on the consolidated 1099, such as First Clearing instead of Wells Fargo Advisors, and National Financial Services instead of Fidelity Brokerage. Is it going to make any difference? Probably not, but my practice is to best align return information with how it appears on IRS information. When a stock or fund is held directly, such as having a direct account in a Vanguard fund, verses owing a Vanguard fund through a brokerage, then each mutual fund should have its 1099-DIV information listed separately, and not summed for all the Vanguard accounts, for example. That is how income for different funds is reported to the IRS.
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Re: Line items on Schedule B

Postby richard » Sun Mar 24, 2013 9:16 am

livesoft wrote:All I do is match what the 1099 says.

I get a 1099 from TDAmeritrade that says "First Clearing" is the payor, so I put First Clearing on the tax form. Actually, TurboTax puts FirstClearing on the tax form.

But if it has $0.01 in tax-exempt interest, I even round down to $0.00 and put zero on the return.

Citibank sends a 1099 that lists of total of all accounts and then lists each account separately. What would you do to "match what the 1099 says"?
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Re: Line items on Schedule B

Postby richard » Sun Mar 24, 2013 9:21 am

sscritic wrote:Vanguard sent me a 1099-DIV with tax-exempt interest on it (yes, that goes on a 1099-DIV for 2012). Vanguard lists each fund separately. Each fund goes on its own line in Part II, Ordinary Dividends (they were reported on a 1099-DIV, after all). The amount is zero for each fund reporting tax-exempt interest.

TurboTax omits zero amount funds from 1099-INT (and has done so for years). Do you believe this is incorrect?

TurboTax requires you to list tax-exempt national funds twice (breaking out amounts that are tax-exempt on your state return). This results in two zero amount lines on Schedule B, usually with a notation to distinguish the two, e.g., Fund X and Fund X (NY exempt). Do you believe this is incorrect?
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Re: Line items on Schedule B

Postby livesoft » Sun Mar 24, 2013 9:25 am

richard wrote:Citibank sends a 1099 that lists of total of all accounts and then lists each account separately. What would you do to "match what the 1099 says"?

First, I would stop using Citibank.
Second, I would download the 1099 into Turbotax and leave it the way TT did it.
Third, on a 1099, there is really only one Box 1, right? It does not matter if one gets an annotated 1099 with everything separate since the IRS (apparently) does not care. Just put what's in the boxes on to the IRS forms.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Line items on Schedule B

Postby richard » Sun Mar 24, 2013 9:50 am

livesoft wrote:
richard wrote:Citibank sends a 1099 that lists of total of all accounts and then lists each account separately. What would you do to "match what the 1099 says"?

First, I would stop using Citibank.
Second, I would download the 1099 into Turbotax and leave it the way TT did it.
Third, on a 1099, there is really only one Box 1, right? It does not matter if one gets an annotated 1099 with everything separate since the IRS (apparently) does not care. Just put what's in the boxes on to the IRS forms.

I would stop using Citi if I could get the same benefits from another bank (long story)

I don't want to give TT my Citi logon information

The form does not have a Box 1. It has a totals on the first page and then by account on the second page, all listed as "Line 1" in essentially the same format. Both pages are captioned "Statement of Interest Income."
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Re: Line items on Schedule B

Postby sscritic » Sun Mar 24, 2013 10:36 am

richard wrote: by account on the second page, all listed as "Line 1" in essentially the same format. Both pages are captioned "Statement of Interest Income."

I know where line 1 is on my Schedule B. There is actually only one 1, but there are many ruled lines for that one line 1. I think Citi is telling you to put your many lines of line 1 on the many lines available for line 1. I am assuming that the first page didn't have a "Line 1" as you didn't mention it.

P.S. I am looking at a real Schedule B, not something cooked up by tax software.
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Re: Line items on Schedule B

Postby richard » Sun Mar 24, 2013 5:54 pm

sscritic wrote:
richard wrote: by account on the second page, all listed as "Line 1" in essentially the same format. Both pages are captioned "Statement of Interest Income."

I know where line 1 is on my Schedule B. There is actually only one 1, but there are many ruled lines for that one line 1. I think Citi is telling you to put your many lines of line 1 on the many lines available for line 1. I am assuming that the first page didn't have a "Line 1" as you didn't mention it.

P.S. I am looking at a real Schedule B, not something cooked up by tax software.

Citi sent me a 1099-INT with two pages. Page one lists a "Line 1" with the total amount of interest from all accounts. Page two lists each account and for each lists "Line 1" with the interest for that account.

This is a piece of paper, not something imported into tax software or generated by tax software.
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