Thursday, May 28, 2015


I recently initiated discussions, via THE TAX PROFESSIONAL, among tax preparers about how the excessive Earned Income Tax Credit due diligence requirements and the Obamacare health insurance coverage requirement have affected their practices and policies.  The bottom line appears to be that these developments turned out to be not as bad as expected, while still unnecessary inconveniences.

The one development of this millennium that has been the most disruptive to the tax filing season is not the EITC due diligence or Obamacare.  It is the consistent late arriving multiple corrected copies of brokerage Consolidated Form 1099 Tax Statements, which began with the inception of “qualified” dividends in 2004.

I just finished reviewing a corrected brokerage tax statement that was generated on March 31st.  It was actually the second corrected statement for this account – the first was generated on March 24th, and was received by the taxpayer two days after the completed 2014 Form 1040 had been mailed out to Uncles Sam and Chris.

It appears from my review that the client would owe the IRS an additional $22.00 based on the multiple up and down changes to the numbers on the statement.  My advice to the client – it is not worth spending the money, and my time, to prepare an amended return.  If the IRS questions the return based on the corrected statement in the future we will worry about it then.

Clients who would normally send me their “stuff” in early or mid-February – allowing for a much smoother work flow during the season - now must wait until mid-March because of the need to “wait and see” if corrected brokerage reports arrive.  This results in a very hectic and stressful “back-end” of the season and additional GD extensions.

Even if no corrected brokerage statements are ultimately issued client must wait until almost mid-March just in case corrections may be issued – hence the necessity for “wait and see”.

Why is there a need for these delayed corrected statements?  Brokerage firms have had a decade to develop and fine-tune their internal software so as to be able to promptly issue correct statements.  Does the fault lie with the brokerage houses, or with the individual mutual fund houses (most corrections involve mutual funds and similar investments) who report corrections to the brokerage houses late?

There is also a problem with late K-1s – but this can be easily avoided by simply not investing in limited partnerships (it is my firm belief that there are mutual funds that would provide the same return or benefits as any limited partnership investment).  But investors cannot avoid using brokers, nor should they avoid mutual funds

I invite any “higher-up” at any brokerage house to explain to me the reason why multiple late corrected copies are necessary.  You can respond in a comment to this post or email me at with “Late Brokerage Statements” in the subject line.

Would things change if the IRS fined brokerage houses $50.00 per day per client for corrected statements issued after February 15th?

As always, I welcome comments and emails from fellow tax professionals on this issue.


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