First, a little background. I graduated from college in May of 2018, and I'm currently on the road to financial literacy! I've had a brokerage account since 2013 and have been unknowingly receiving 1099's throughout that time. Last year was my first full year of working, and subsequently my first tax return filing.
Second, my question. Should I file an amended tax document for 2018 with the 1099 included? I had about $6k total capital gains distribution in my taxable account for 2018. Also, was I required to file 1099's for all the years I've had the brokerage account? I wasn't aware of what a 1099 even was prior to this year!
I would really appreciate some clarification on this matter. If I could provide more information to help answer these questions, I'd be happy to do so.
As an edit, I haven't sold anything in the mentioned brokerage account up until this year (2020), if that makes a difference. I've simply had the account since 2018 and dumped $15k in it every year since then.
A noob boglehead.
Yes, you should file for prior years, if required.
After filing and paying the taxes owed, if any, the IRS will send you a notice of the interest and any penalties that are due.
You don't "file" 1099's! The sender of the 1099's already sent the IRS a copy.
What you do need to do is figure out if the 1099's indicate income upon which you need to pay taxes. With $6k or less of gains distributions, if you had no other income while in school, then it is quite likely that no tax is due. A caveat: Check if your parents claimed you as a dependent.
Your graduation year, assuming you got a job, could be more complex. It depends on how much income you earned. If we assume the distributions were long term capital gains (i.e. LTCG), and assuming you filed as "single", if your wages and other income plus the distributions is less than $50600, then you have no federal tax on the distributions. You'll have to check if state tax is due.
About the other years...in general, a person does not have to file taxes if their income is lower than their standard deduction. But, there is a thing called the Kiddie Tax that might apply to you/your parents for the 2013 - 2017 tax years. Here is some information from the IRS on that.
I'll be sure file an amended tax return for 2018. Thanks for the information!
Meaning, one of the requirements for having to file form 8615 is that I was required to file a tax return. If I didnt have earned income, would that make me except? Sorry if it's simple and I'm just not getting it.
I don't know or understand this tax very well and was not sure if it was supposed to be on your parents' return or not. But it does say you don't need to file the form if you don't have to file a return.
https://www.irs.gov/help/ita/do-i-need- ... tax-return
I appreciate the advice and consideration offered in this post. This community has really helped push me to become financially literate and responsible, and it's so much easier to do in a warm and welcoming community.
Thanks for the update.
Can you tell us what you learned about the prior years? If your income was very low, why do you need to file them now? And how many years back did s/he say to go?
So here's the process I went through. I contacted two different CPA's about the situation explained in the original post. One told me that the 2018 tax return that I incorrectly filed "wouldn't be worth amending." And that if I recieve a notice from the IRS I should contact her and let her know about it. The second CPA recommended I amend my 2018 tax return, as well as file tax returns for the years 2013-2017.
Getting that conflicting advice was frustrating. I figured I would amend my 2018 return, since it's the first year of my life I had an earned income. I'm still unsure of what to do about the 1099's from the years 2013-2017 when I had no earned income. I contacted a third CPA for a consultation about that very issue, and I'll see what advice is offered.
There are many different types of Form 1099 (e.g. 1099-INT, 1099-DIV, 1099-MISC, 1099-R, et-al) so it would be very helpful for you to specify what documents you received for each year.
It would also be helpful for you to indicate the year for which you received what document, specifically indicating which block numbers on the form have an amount and what that amount is. Also what blocks on the form have just a check mark.
For the years you had other types of income, knowing what types of documents were received and the dollar amount is also helpful.
Are we correct in assuming you were claimed as a qualified dependent on your parents tax returns for the years prior to 2018?
The reason for the inquiry is that many of us here are volunteers in a couple of major free tax preparation services (under the auspices of the IRS) and could better answer your questions or offer guidance if we know more information.
I'd be happy to give you more specific information. From the years 2013-2018 I recieved 1099-DIV forms, and in 2018 only I recieved a W2 form from my teaching job. From the years 2013-2017 I was a student and indeed a qualified dependent.
I'm not quite sure what you mean by blocks and check marks, but here is the breakdown of each consolidated 1099-DIV form.
Total ordinary dividends=383
Total capital gains distribution=0
Total ordinary dividends=1,292
Total capital gains distribution=967
Total ordinary dividends=861
Total capital gains distribution=3,074
Total ordinary dividends=1,012
Total capital gains distribution=2,940
Total ordinary dividends=2,521
Total capital gains distribution=6,434
Total ordinary dividends=3,683
Total capital gains distribution=5,960
For all other boxes the amount was zero, besides for the foreign tax paid which was always about 50 or less. If theres any other information I could provide I'd be happy to.
Thank you for taking the time to help me with this!
In 2018 he had earned income in the form of the W-2 but did not include his ordinary dividends and capital gain distributions (and possibly foreign tax paid), so he should amend his 2018 return.
If Arborist's investment statements reflect foreign tax paid he may (repeat may) be able to recoup that tax paid for certain years when filing. He should start with the oldest year first and get them filed prior to April 15, 2020 for his best chance of getting any refund that might be due.
The above is all assuming none of his income was reported on his parent's federal income tax return prior to 2018. That could change things as to his reporting on his own.
Other more knowledgeable persons are asked to comment.
Yes, it does work. I just put the poster's info in for 2017 using age 20 for that year and it came up with the same results as I had calculated on my own. His unearned income (ordinary dividends plus capital gain distributions) exceed the exemption amount for that year of $1,050. I should note the response time for this tool is quite slow at times.
- -you were under 19 or a full time student and
-if your parents claimed you as a dependent and
-if they did not include this income on their own taxes....
I would assume you need to file for the earlier years as well, but I didn't look.
And I'm not sure how far back one has to go.
Obviously, the first thing you need to check is if your parents reported this income on their own taxes (which they would have been allowed to do).
Reading the information provided, I couldn't be more thankful for having clarity on this issue. I'd like to file these returns and know for certainty that I've paid my fair share of taxes. Curiously, the third CPA I contacted told me I dont have to file for the years 2013-2017, though I'm skeptical as their reasoning wasn't provided.
Thank you both tomd37 and retiredjg for looking into this. This community is amazing, and it only makes me want to further my financial education and help others later on!