why do tax forms take so damn long?

[frugalnacho]

I want to file my tax return.  I wanted to wrap it all up a few weeks ago, but I have to wait for all the relevant forms. Some institutions are stating that forms will be available at the end of February.  Why does it take 2 months to generate a tax form when it's all tracked on a computer and is likely completely automated?  Seems a little excessive. 

[RWD]

I have had to wait until March for tax forms before... I also don't understand why they can't be generated the first week of January.

[Linea_Norway]

Probably because they get away with it.

My DH used to own stock in the company where he worked. The value of this stock was also delivered extremely late, which made that he had to deliver his tax papers very late. Very annoying for a person who likes to do everything on time.

Can you cut your ties with this company for the next year?

[frugalnacho]

Probably because they get away with it.

My DH used to own stock in the company where he worked. The value of this stock was also delivered extremely late, which made that he had to deliver his tax papers very late. Very annoying for a person who likes to do everything on time.

Can you cut your ties with this company for the next year?

Well it's vanguard telling me the forms won't be available until the end of february, so no I won't be cutting ties with them.  I'm just frustrated that it takes them that long.  They have all the information, and they know exactly what the dividends are before Dec 31, so I don't understand why it takes them so long. 

[Ann]

Schwab says theirs will be available Feb 15th.  It seems standard. I feel you - I like to get things done early, too - but I just try  to adjust my thinking.   I wouldn’t expect to be able to do my taxes in December.  Now I just don’t expect to be able to do it in January or early February. 

I did actually sell my stock in a company once because it produced a K-1 tax form that would come out until mid-March!  It was a petty reason to sell (the real reason <I>should</I> have been that I bought it my first year investing on a “tip” from a friend and now I concentrate on index funds, but it honestly was the tax implications that annoyed me).

[Morning Glory]

Schwab says theirs will be available Feb 15th.  It seems standard. I feel you - I like to get things done early, too - but I just try  to adjust my thinking.   I wouldn’t expect to be able to do my taxes in December.  Now I just don’t expect to be able to do it in January or early February. 

I did actually sell my stock in a company once because it produced a K-1 tax form that would come out until mid-March!  It was a petty reason to sell (the real reason <I>should</I> have been that I bought it my first year investing on a “tip” from a friend and now I concentrate on index funds, but it honestly was the tax implications that annoyed me).

Ha my DH did the same thing and I asked him to sell it after the first time I had to deal with schedule K1. Very annoying.

There is no reason tax returns couldn't be 90% automated (the IRS has all the information from W2s and 1099s, you would just have to add things like rental income and charitable donations). Lobbyists from places like TurboTax are the ones who keep it so complicated.

[slappy]

Probably because they get away with it.

My DH used to own stock in the company where he worked. The value of this stock was also delivered extremely late, which made that he had to deliver his tax papers very late. Very annoying for a person who likes to do everything on time.

Can you cut your ties with this company for the next year?

I have one that should be available mid feb. With Fidelity, there is a little question mark that says why is it taking so long. I clicked it and it said that it is waiting for information from one of my funds. My understanding is that sometimes funds reclassify their dividends, so that is the information that they are waiting for. Honestly mid-Feb doesn't seem like terrible timing for filing taxes. I don't think the IRS even accepts them until the end of Jan anyway.

[thesis]

There is no reason tax returns couldn't be 90% automated (the IRS has all the information from W2s and 1099s, you would just have to add things like rental income and charitable donations). Lobbyists from places like TurboTax are the ones who keep it so complicated.

Agreed. There's a lot of money and power in the tax business. Special interests rule the day. This is also why the tax code is unlikely to ever be truly simplified, though I am thankful they did away with the personal exemption and instead just upped the standard deduction. I mean, where the hell did that even come from?

I would rather file my taxes on January 1, as soon as possible, but I and most others still have to wait at least until the end of January =/. Heck, I even did some estimations and practically "did" my tax return several months ago. I was just curious whether I would owe money or get any back. If I did my math right, there should be a decent-sized return.

[solon]

I'm the accountant for my company, a small tech business. I have to send out 1099s this year, for a couple dozen people, but I'm having a hard time collecting W9s from a couple. Until I can get their official information, I can't generate the 1099s.

I'm sure it's frustrating for a few of our vendors who want their tax forms. It's also frustrating for me because I have a really easy open task that I can't do.

[AMandM]

I'm the accountant for my company, a small tech business. I have to send out 1099s this year, for a couple dozen people, but I'm having a hard time collecting W9s from a couple. Until I can get their official information, I can't generate the 1099s.

I'm sure it's frustrating for a few of our vendors who want their tax forms. It's also frustrating for me because I have a really easy open task that I can't do.

Can you send out the 1099s for the people who have given you their W9s?

[solon]

I'm the accountant for my company, a small tech business. I have to send out 1099s this year, for a couple dozen people, but I'm having a hard time collecting W9s from a couple. Until I can get their official information, I can't generate the 1099s.

I'm sure it's frustrating for a few of our vendors who want their tax forms. It's also frustrating for me because I have a really easy open task that I can't do.

Can you send out the 1099s for the people who have given you their W9s?

Yeah, I think so, but then I have to go through the process twice. I'm trying to do it all in one batch.

[Boofinator]

I honestly have no clue, but might it be related to some law? For example, for a company to know whether dividends are qualified or not, they would have to observe the 60 days following the last possible transaction date, which would take things right up to March 2 for the earliest distribution of forms, if my math is correct. Anyway, just hypothesizing and could be completely irrelevant.

[slappy]

I honestly have no clue, but might it be related to some law? For example, for a company to know whether dividends are qualified or not, they would have to observe the 60 days following the last possible transaction date, which would take things right up to March 2 for the earliest distribution of forms, if my math is correct. Anyway, just hypothesizing and could be completely irrelevant.

This is my understanding of the issue

[Eric]

Slightly off topic, but you gotta be nuts to want to file your taxes before mid-March.  Tax forms (especially for investments) get corrected or amended ALL THE TIME.  In an effort to file a month or two early, you're putting yourself at risk for needing to file twice.  So why not just wait? 

[frugalnacho]

Slightly off topic, but you gotta be nuts to want to file your taxes before mid-March.  Tax forms (especially for investments) get corrected or amended ALL THE TIME.  In an effort to file a month or two early, you're putting yourself at risk for needing to file twice.  So why not just wait?

I got burned on that once.  I like to get them completed, then hold on to them until the end of march. 

[Paul der Krake]

Funds keep track of tens of thousands of securities. I'd find it suspicious if they magically had it all figured out on January 1.

Only people without taxable accounts can file early. Such is the price of success.

[seattlecyclone]

I honestly have no clue, but might it be related to some law? For example, for a company to know whether dividends are qualified or not, they would have to observe the 60 days following the last possible transaction date, which would take things right up to March 2 for the earliest distribution of forms, if my math is correct. Anyway, just hypothesizing and could be completely irrelevant.

This, and if you sell some stock for a loss on December 31, that sale could potentially turn into a wash sale until very late in January. There are probably some other edge cases too.

[Catica]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

[walkwalkwalk]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

[daverobev]

At least in Canada, Trust income forms (which covers ETFs) take a while because they have to get the information from the underlying assets. And, if the ETF holds funds rather than equities directly... you have this chain of things that need to happen.

It is ridiculous that this can't be streamlined (and that it is up to the individual to provide information to the government when they already should have it...).

[walkwalkwalk]

Its not that the brokerage companies don't know that there were dividends/capital gains, its the character of the income that they have to determine. It could be qualified or not qualified dividends depending on what the fund bought or sold, on top of whether you bought or sold the fund within a certain time frame.

[chemistk]

I'd like to think that as a benefit of having absurdly low fees, Vanguard takes a little longer to get things sorted. A fair trade-off, IMO. But also as others said, there's just a lot there for Vanguard that probably needs a few once-overs to make sure it's correct.

There are other reasons tax forms can take a long time. My wife had a trust fund, and because of how the fund was set up, we didn't receive the tax forms until after the fund has filed its own taxes first, so it usually wasn't until late February or early March that we got all the relevant forms we needed.

[MustacheAndaHalf]

I'd reinforce Boofinator's speculation about dividends.  If you buy a mutual fund right before the dividend date, the 60 day clock starts counting to decide if those dividends are qualified or not.  If anything, Feb 15th probably isn't enough time for the most extreme case of buying right before the record date for the dividend.

So if you're waiting on 1099-DIV, or a combined 1099 that includes 1099-DIV, it might be about the dividends being qualified (held 60 days plus other rules) versus not qualified (and so taxed at a higher rate).

In addition, if you sell an asset - say a mutual fund - on Dec 31st at a loss, that offsets your capital gains.  But if you buy that same mutual fund 3 weeks later, you have retroactively turned that prior event into a "wash sale", and you cannot claim a loss.  So form 1099-B could also be impacted, as wash sales require a 30 day wait to see what happens.

[Catica]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

[freeat57]

I received my Vanguard 1099 Saturday, 1/26.

It would be great if the US IRS did what the Swedish tax authority does.  You get a filled out form from them, and if you agree with it, you just sign it and you're done!  (All online, by the way.)

[FIPurpose]

I've already received a corrected form. Though I have to wait for a couple K-1's in March before I can submit my taxes anyways.
 While I do remember the ease of filing taxes in my youth. Stapling a $20 check to my hand-written 1040-EZ at 15. I make a lot of money, and I tend to add just one more item each year.

Go to college you learn about 1098t's
Near the end of college I opened up a Roth IRA.
Get a real job, buy a house, I itemize my deductions.
I took on a side gig and learned all about Schedule C's
I buy and sell some stocks I learn about Schedule D's and the various 1099's
I buy into some various investment opportunities I learn about K-1's. Which in some way is nice, since they are getting a preferential tax treatment this year. (199a)

Once you've gone through it once, it's not too difficult. A little bit of data entry and that's about it.

Actually they may have simplified it for a lot of us. The new standard deduction increase means I have almost no chance of itemizing. Which is by far the most work I had to do in the past.

Though I think they need to get rid of the standard deduction and just label a 0% tax bracket. Get rid of the mortgage interest deduction, charitable donations, casualty and theft. Move the medical expense deduction and taxes paid above the line.

[fuzzy math]

Yes this pisses me off too. Although last year tax law changing in Feb caused me to have to re-file which cost me more $$.
I am getting a refund this year and would sure like to access it.

[walkwalkwalk]

I've already received a corrected form. Though I have to wait for a couple K-1's in March before I can submit my taxes anyways.
 While I do remember the ease of filing taxes in my youth. Stapling a $20 check to my hand-written 1040-EZ at 15. I make a lot of money, and I tend to add just one more item each year.

Go to college you learn about 1098t's
Near the end of college I opened up a Roth IRA.
Get a real job, buy a house, I itemize my deductions.
I took on a side gig and learned all about Schedule C's
I buy and sell some stocks I learn about Schedule D's and the various 1099's
I buy into some various investment opportunities I learn about K-1's. Which in some way is nice, since they are getting a preferential tax treatment this year. (199a)

Once you've gone through it once, it's not too difficult. A little bit of data entry and that's about it.

Actually they may have simplified it for a lot of us. The new standard deduction increase means I have almost no chance of itemizing. Which is by far the most work I had to do in the past.

Though I think they need to get rid of the standard deduction and just label a 0% tax bracket. Get rid of the mortgage interest deduction, charitable donations, casualty and theft. Move the medical expense deduction and taxes paid above the line.

I agree with your last point, with the exception of changing the type of taxes you can deduct, imho it should be sales taxes OR state & local income taxes. If mortgage interest isn't deductible then neither should property taxes, unless maybe you add a renters credit like some states have already.

[Boofinator]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

[Boofinator]

Though I think they need to get rid of the standard deduction and just label a 0% tax bracket.

I agree with a lot of what you say, except this portion, which I don't think is a political possibility. So the standard deduction just serves as an effective 0% tax rate while allowing politicians to insist that everyone needs to pay into the system.

[Raenia]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

It depends on how much interest you received, actually.  Last year I didn't receive a 1099-INT from one of my banks, so I inquired and was informed that the interest I'd received was below the threshold for reporting, so they didn't issue a form.  Do ask your bank about it, though, don't just assume you're good to go.

[frugalnacho]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

It depends on how much interest you received, actually.  Last year I didn't receive a 1099-INT from one of my banks, so I inquired and was informed that the interest I'd received was below the threshold for reporting, so they didn't issue a form.  Do ask your bank about it, though, don't just assume you're good to go.

You are still legally required to report it to the IRS, you just won't have a 1099-INT issued by the bank.  The IRS likely won't know if you don't report it though since they also won't be receiving a 1099 from your bank, but you are still supposed to be honest and report it.

[FIPurpose]

Though I think they need to get rid of the standard deduction and just label a 0% tax bracket.

I agree with a lot of what you say, except this portion, which I don't think is a political possibility. So the standard deduction just serves as an effective 0% tax rate while allowing politicians to insist that everyone needs to pay into the system.

Based on how many people don't even understand marginal tax rates, you're probably right. Keep the standard deduction, but just remove itemization.

[I'm a red panda]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

It depends on how much interest you received, actually.  Last year I didn't receive a 1099-INT from one of my banks, so I inquired and was informed that the interest I'd received was below the threshold for reporting, so they didn't issue a form.  Do ask your bank about it, though, don't just assume you're good to go.

Technically, you still have to report the interest even if they don't produce the form.

Most people just don't because the chance of audit is so low.

It's below THEIR threshold for reporting. There isn't a threshold for YOU reporting. You are responsible for reporting all income.

[FIPurpose]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

It depends on how much interest you received, actually.  Last year I didn't receive a 1099-INT from one of my banks, so I inquired and was informed that the interest I'd received was below the threshold for reporting, so they didn't issue a form.  Do ask your bank about it, though, don't just assume you're good to go.

Technically, you still have to report the interest even if they don't produce the form.

Most people just don't because the chance of audit is so low.

It's below THEIR threshold for reporting. There isn't a threshold for YOU reporting. You are responsible for reporting all income.

Technically the threshold for reporting is 0.50. I received a 1099-INT this year of like 0.46. It rounds down to 0, so no need to report.

[JZinCO]

Slightly off topic, but you gotta be nuts to want to file your taxes before mid-March.  Tax forms (especially for investments) get corrected or amended ALL THE TIME.  In an effort to file a month or two early, you're putting yourself at risk for needing to file twice.  So why not just wait?

I have already received corrected forms because the issuer failed to account for some small deduction associated with new tax law.
I always wait until the end because I sometimes receive corrected forms and this year should be more likely than most.

During the passage of the recent tax changes, this idea was introduced: -The IRS calculates how much they expect - The IRS sends you a summary of the information -You sign and say OK or add missing information that wasn't previously reported. This sounds like the Swedish model.
The current model makes no sense: -The IRS calculates how much they expect -You calculate how much they should expect -The IRS compares your report against theirs, accounts for missing information that wasn't previously reported -The IRS makes adjustments based on previously missing information and if required, tells you how you messed up your calculations and to pay extra with a late fine
The latter model creates duplicate work and carries the risk of accidental tax misreporting. In addition, we (collectively) all have to interpret tax code which often means audits that aren't needed, amended tax forms, etc.

[Boofinator]

What about banks?  Do they have a deadline when they have to send out all the interest forms?

Jan 31

If I don't receive them by then, does that mean that I don't have to report the interest?

In the off-chance this wasn't said in jest: no. You must contact the institution to try to obtain the required information. If that doesn't work, you should contact the IRS who will in turn contact the financial institution. If you still don't get them, you'll file additional paperwork and estimate the missing information, then file an amended return when the information is finally received. That's if you're a rule-follower.

If you like to live on the wild side, let us know how it turns out.

It depends on how much interest you received, actually.  Last year I didn't receive a 1099-INT from one of my banks, so I inquired and was informed that the interest I'd received was below the threshold for reporting, so they didn't issue a form.  Do ask your bank about it, though, don't just assume you're good to go.

You're right, I believe $10 is the cut-off for when they are required to send you a form.

[YttriumNitrate]

Funds keep track of tens of thousands of securities. I'd find it suspicious if they magically had it all figured out on January 1.
Only people without taxable accounts can file early. Such is the price of success.

But, you should really be aiming to have to pay a little at tax time to avoid giving the government an interest-free loan, so you shouldn't want to file until mid-April and the price of success is minimal.

[JZinCO]

Funds keep track of tens of thousands of securities. I'd find it suspicious if they magically had it all figured out on January 1.
Only people without taxable accounts can file early. Such is the price of success.

But, you should really be aiming to have to pay a little at tax time to avoid giving the government an interest-free loan, so you shouldn't want to file until mid-April and the price of success is minimal.

I think there are two things here: the refund (or tax owed) and the filing time. If the former is planned for, the filing time is moot.

Still, I used to believe an interest-free loan was squandered opportunity.. until I found that the cost/benefit of tax planning for a relatively uncomplicated scenarios (e.g. a W-2 employee with 1099s and small business) wasn't worth it. But then my returns are generally under $1500. I imagine if one has an 'uncorrected' tax burden of several thousand, then it might be worth getting things right in Q1. Also, as I and others pointed out, it's no fun when you think you're done with taxes and somebody sends you a corrected form.