Tax Information and Reporting - Year-End Tax Forms | Interactive Brokers LLC

Year-End Tax Forms

For US Persons, IBKR issues 1099 forms in a consolidated format. Most 1099 forms will appear on one statement rather than as separate forms.

Information reported on the Consolidated Form 1099 is also reported to the IRS and should be reported on your federal tax return. Please consult your tax advisor for proper reporting of all Form 1099 amounts.

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Consolidated Form 1099 1099-INT | 1099-OID | 1099-DIV | 1099-B | 1099-MISC

Form 1099-INT

Form 1099-INT reports interest income including taxable and tax-exempt interest dividends from mutual funds paid to you during the year.

Line 1 reports interest income, exclusive of US savings bond and US Treasury obligations interest. Interest from US savings bonds and US Treasury obligations is reported in Line 3. If the IRS has notified us that income tax must be withheld on interest income in your account, US tax withheld, if any, amount will be reported in Line 4.

Interest payments details are part of the supplemental information on the Consolidated 1099

US savings bond and treasury obligation interest is separated for state tax reporting. Interest on these obligations is generally not subject to state tax.

Tax-exempt interest (Line 8) – is generally not subject to federal taxation. If you own municipal bonds, then interest on bonds from your home state is generally not subject to state tax. However, municipal interest from other states is taxed in your home state.

Line 9: Some interest paid by muni bonds is subject to AMT (Alternative minimum tax), amount in box 9 is the amount by which you adjust your taxable income to calculate AMT tax on Form 6251.

Lines 10-13 provide information concerning bond premiums and discounts: Depending on your individual tax circumstances and elections, these items must be reported on your tax return. We suggest that you consult your tax advisor about bond premiums and discounts.

Accrued interest paid: Provided in supplemental information on consolidated 1099 – reduce the amount of reported interest by interest paid.

• Remember: Interest income cannot be reduced by accrued interest paid until the first interest on the same security is received. If a bond is purchased in December on which accrued interest is paid and the first interest payment is in March of the following year; the accrued interest paid must be carried over into the following year.

Interest payments received on interest producing securities loaned out are reported as substitute payments in lieu of interest on Form 1099-Misc.

Margin Interest Paid

If you have an IBKR margin account you may have margin interest expense paid from your account. Margin interest is included as an informational item in your Consolidated 1099. Please consult your tax advisor for the proper treatment and reporting of margin interest paid on your tax return.

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Form 1099-OID Original Issue Discount

Form 1099-OID reports the amortization of bond interest on discounted bonds taxable annually. Original Issue Discount (OID) is the difference between an obligation's stated redemption price at maturity and the issue price of the debt instrument.

Interest on bonds sold at a discount at the time that a bond or other debt instrument is issued and accreted annually is called Original Issue Discount or OID. Interest income is recognized and the cost basis of the bond is increased.

The original issue discount (OID) greater than $10 is reportable and Form 1099 OID will be issued.

Line 1: OID – amount computed as OID for year – based on IRS tables

Line 2: Other periodic interest – generally interest paid by a bond as a special payment or received on sale.

Line 6: OID on US Treasury Obligations

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Form 1099-DIV Dividend Income

Form 1099-DIV reports ordinary dividends credited to your account during the year, short-term capital gains distributions and total capital gains distributions, as well as non-dividend distributions (return of capital), dividends paid by foreign corporations, mutual funds and money market funds.

Line 1a: All dividends received.

• Remember: Money Market funds pay dividends rather than interest. This type of dividend does not qualify for reduced taxation.

Line 1b: this line reports the amount ELIGIBLE for qualified dividend treatment. Qualified dividends are taxed at the Long-term Capital Gain (LTCG) tax rate (0%, 15%, & 20%).

• Remember: the security paying the dividend must be long in your account for at least 61 days including the date of dividend record to be treated as a qualified dividend. The amount reported in this box on the 1099DIV does not consider holding period. Information concerning holding period is on the dividend report.

Line 2a: Long-term capital gain distributions – usually from mutual funds – reported on schedule D of return and are taxed at long-term capital gain rate.

Line 2b: Un-recaptured sec. 1250 gain

Line 3: Non-dividend distributions – return of capital

Line 5: Investment expenses – expenses of a non-publicly offered regulated investment company, generally a non-publicly offered mutual fund.

Line 6: Foreign tax paid – foreign tax withheld at the source on dividend payments

Lines 8 & 9: Liquidation distributions - usually from mergers or acquisitions or other corporate restructuring actions.

Line 10: Exempt Interest dividends. Generally dividends paid by tax-exempt bond funds

Line 11: Amount on line 10 used to calculate AMT. Please see explanation in 1099-INT

Dividends declared and not yet paid at year-end are not generally included; however, there is an exception for mutual funds payments. Any dividend declared by a mutual fund during October, November, or December and paid the following January is reported in the year declared.

Dividend payments received on securities loaned out are reported as substitute payments in lieu of dividends on Form 1099-MISC. Payments in lieu of dividends are ordinary income and not eligible, except in specific circumstances for qualified dividend tax rates.

Please see more details in Dividend Report.

All IRS forms are available free of charge at www.IRS.gov/formspubs or by calling the IRS at 800.829.3676 (800-TAX FORM)

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Form 1099-B Proceeds From Broker and Barter Exchange Transactions

Form 1099-B reports proceeds from securities transactions including sales of stocks, bonds, short sales, redemptions, tenders and bond maturities. Additionally, profit and loss from futures is also reported on Form 1099-B.

Proceeds from Broker and Barter Exchange Transactions:

1099B reporting is made up of four separate forms:

• Covered securities with short-term gains or losses,
• Covered securities with long-term gains or losses, and
• Uncovered securities.
• Section 1256 transactions.

All of the 1099-B forms contain the same boxes, however not all of the boxes are used on every form.

Box 1b reports the date the security was acquired. For short sales the date of acquisition of the security used to cover the short position is reported. Box 1b will be blank for noncovered securities.

Box 1c reports the date of sale or exchange for the security. For short sales the date shown is the date the security was delivered to close the short sale.

Box 1d reports gross proceeds, less commissions and fees, of sales and short sales of stocks and bonds, other debt obligations, commodities, forward contracts, mutual funds and other securities. This amount may also be adjusted for certain related options positions.

Box 1e reports cost or other basis of securities sold. This basis may be adjusted for wash sales, related options positions, and corporate actions. Box 1e is not used for reporting sales of uncovered securities as cost basis is not reported for these sales.

Box 2 indicates whether the gain or loss is long-term or short-term.

Box 3 will be, checked for covered securities.

Box 4 is the amount of federal income tax withheld from the sale proceeds, if any.

Box 5 will be checked for non-covered securities.

If Box 7 is checked the any loss from a change in control or other capital change cannot be taken on your tax return. Please consult your tax advisor if this box checked

Boxes 8,9,10 and 11 is the aggregate profit or loss of lines 8, 9, and 10 on regulated futures contracts (and options on futures contracts) commonly referred to as Section 1256 transaction for the year. Refer to Form 6781 and Instructions for guidance on how to report these boxes.

Reminder:

• The details for each 1099B transaction is presented in your Form 8949 worksheet. This provides all the details for each transaction in the format that is required for tax reporting for covered securities all the information necessary to report is present, however please review the worksheet for accuracy. 8949 worksheet are account specific, please keep in mind that tax reporting is individual (person) specific so transactions in other accounts may impact tax reporting. For non – covered securities, information we have on hand for cost basis is reported on the 8949 worksheet, however this may not be accurate. Please verify the cost basis of all non-covered securities before reporting on your tax return.
• Each of these reports is specific to the account associated with the report, however the tax code requires you to report on your tax return across all of your accounts. If you hold the same security in multiple accounts and sell it, the gain or loss calculated and reported to the IRS may be different than presented on an account level and must be adjusted.

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Form 1099-MISC Miscellaneous Income

Form 1099-MISC reports substitute payments in lieu of dividends and tax-exempt interest received in your account, gross fee income received by advisors, stock loan fees received, and soft-dollar payments.

Line 2 Royalties: Payments of Royalties are generally from investments in natural resource companies.

Line 3 Other income: Stock loan fees earned.

Box 7: Reports gross fee income received by advisors:  Fees earned by advisors – note that for these types of payments 1099 MISC forms are issued on January 31^st.

Line 8 Substitute payments in lieu of dividends and interest (PIL): Substitute payments of interest and dividends. These payments replace the normal interest or dividend payment when your security is lent.

• Remember: These payments cannot be “netted” with PIL paid on stocks you have borrowed. They also are not interest or dividend payments, but are miscellaneous income and should be treated as such on your tax return. PIL received in lieu of a dividend payments are not eligible to be treated as qualified dividends except under specific circumstances.

Details for fee income received by advisors and brokers and stock borrow fees paid can be found in your Annual Statement. Details for payments in lieu of dividends or tax-exempt interest and addition information on Margin interest paid are included in your year-end Dividend Statement.

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Retirement Accounts - Tax Reporting: Form 1099-R - Distributions from IRAs

Form 1099-R reports distributions from Traditional, Roth, SEP and Rollover IRAs held at IBKR. The IRA’s trustee/custodian issues these forms on or before 1/31 annually for the prior year. For a complete description of Form 1099-R, refer to the instructions for Form 1099-R and 5498 at www.irs.gov.

Box 1 reports the total amount you received this year. If you have a Traditional IRA, the full amount on line one may not be taxable, refer to form 8606 and the instructions for this form for more information.

Box 2a reports the amount of your distribution that may be subject to federal income tax. Box 2b indicates the taxable amount is not determined. It is your responsibility to determine the taxable amount.

Box 2b indicates if the distribution was for the full value of the account.

Box 4 is the amount of federal income tax withheld from your distribution.

Box 7 identifies, by code, the type of distribution you received and if the distribution is from a Traditional, SEP or SIMPLE IRA. Some of the more common IRS codes are listed below.

Box 12 reports the amount of state tax withheld.

Box 13 identifies the state for which tax, if any was withheld, and provides the state identification number for IBKR.

Most common:

Direct Rollovers

The IRS requires the trustee/custodian of an employer-sponsored retirement plan (401(k), 403(b), 457(b), or annuity) to report a direct rollover to a Traditional IRA as a distribution on Form 1099-R.

Trustee-to-Trustee Transfers

A transfer of funds in your traditional IRA from one trustee/custodian directly to another is not considered a rollover. There is no distribution to you and the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers. Trustee-to-trustee transfers are not required to be reported on Form 1099-R.

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Tax Reporting: Form 5498

Form 5498,"IRA Contribution Information", is an information form used to report contributions and rollovers to Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. Form 5498 also reports the Fair Market Value (FMV) of your IRA account as of year-end.

Box 11 on the form indicates that you must take a required minimum distribution (RMD) for all years after you have attained age 70 1/2. If you attained 70 1/2 years of age or older in the previous tax year, Federal law requires that you begin taking minimum distributions from your Traditional, Rollover or SEP IRA account(s) in the following calendar year. Additionally if you are the beneficiary (non-spouse) of an inherited IRA you must also tax a RMD in the following year.

Owners of traditional IRAs may also direct that their RMD (up to $100,000) for a year be paid directly to a charity. You will still receive a 1099R if this is the direction you have given. Please consult your tax advisor.

Your IRA's trustee/custodian must distribute 5498s to participants and the IRS no later than May 31 of each calendar year. The timing of this form is a result of contributions for the prior year may be made up to the filing date of your income tax return (generally April 15).

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Tax Reporting: Form 2439

Form 2439, "Notice to Shareholder of Undistributed Long–Term Capital Gains", reports to owners of Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) undistributed capital gains allocable to them. A separate form 2439 will be issued for each investment. These forms will be issued 90 days following the fiscal year end of the RIC or REIT. (Note: some RICs and REITs do not have calendar fiscal years, please check detail on the website of the investment).

Box 1a reports the total undistributed long-term capital gains, including the amounts in Boxes 1b, 1c and 1d. For individuals, this amount is reported on your IRS Form 1040, US Individual Income Tax Return, Schedule D, Capital Gains and Losses.

Box 1b reports the Section 1250 unrecaptured gain, and is your allocable portion of the amount included in Box 1a that has been designated as unrecaptured section 1250 gain from the disposition of depreciable real property. For individuals, this amount is entered on your unrecaptured Section 1250 Gain Worksheet. Box 1c reflects Section 1202 gain; and Box 1d reflects the collectibles (28%) gain.

Box 2 contains any Federal Income tax paid by the RIC or REIT on this gain in your behalf.

When the fund has paid a tax on the capital gains (Box 2, Form 2439), you are allowed a credit for the tax as it is considered paid by you. You can take this credit on Form 1040 for the amount of tax paid shown on in Box 2. Copy B of Form 2439 should be attached to or scanned for E-filing with your return.

The undistributed capital gains reported on Form 2439 should be reported in addition to any capital gains reported on Form 1099-DIV. Please see details in IRS Publication 550 for reference.

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Dividend Report: Annual Dividend Statement

The report details all dividends, payments in lieu of dividends, and return of capital as well as any tax withholding on these amounts paid into your account during the year. Additionally, all dividends reported are summarized by revenue type (regular vs. qualified) to make year-end tax reporting easier. The dividend report is provided for all clients. Dividends will be reported in the base currency of the account.

US clients should reconcile the dividend report with your Form 1099-Div in the consolidated 1099. For U.S foreign tax credit reporting, dividends are also summarized by source country.

In general, the dividend report is available on or before February 15.

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Tax Reporting: Form 8949

Worksheet Form 8949 Worksheet, Sales and Other Dispositions of Capital Assets Worksheet applies to individuals, trusts, and partnerships. Form 8949 Worksheet reconciles amounts that were reported to you and the IRS on Form 1099-BFor worksheets detailing covered securities (Box A and Box D) these should be the amounts you report on your tax return. However, this report is account specific.

The Form 8949 worksheet shows trade details for all securities (stocks, options, single stock futures and bonds). Taxpayers report transactions on Form 8949 under one of six categories:

• Part I-box A: Short-term transactions reported on Form 1099-B with basis reported to the IRS (Covered Securities held less than one year)
• Part I-box B: Short-term transactions reported on Form 1099-B but basis not reported to the IRS (Uncovered Securities – such as PTPs, held less than one year)
• Part I-box C: Short-term transaction for which you cannot check box A or B
• Part II-box D: Long-term transactions reported on Form 1099-B with basis reported to the IRS (Covered Securities held more than one year)
• Part II-box E: Long-term transactions reported on Form 1099-B but basis not reported to the IRS (Uncovered Securities, such as securities purchased before 1/1/11, held more than one year
• Part II-box F: Long-term transaction for which you cannot check box A or B

The IBKR 8949 worksheet reports transactions in this format. All attempts have been made to tie the information on these worksheets to your Form 1099-Bs; however discrepancies may exist. For accuracy of information on the Form 8949 worksheet, please review your trading records or consult your tax advisor.

Transactions are paired (sells matched with buys) according to the tax basis declaration method selected in Account Management or Client Portal at time of sale, or using the IBKR Tax Optimizer lot selection designated at the time of the trade. FIFO is the default methodology. All cost basis include commissions. All proceeds are reported net of commissions.

The worksheet for Form 8949 provides details for both covered and noncovered securities. The details may include information not reported on Form 1099-B and adjustments and explanations where the information required to be reported on Form 1099-B differs from actual tax reporting. Explanations are provided using a letter code. For example:

• Noncovered Securities: Cost or other basis, and wash sale losses disallowed for noncovered securities.
• Incorrect Basis or Proceeds for Covered Securities
  • Form 1099-B reports cost basis adjusted for wash sale losses disallowed only when the loss was disallowed on the sale of a covered securities. The Form 8949 worksheet will provide a basis adjustment where the basis of a covered security is adjusted for a wash sale disallowed on a noncovered security. For example a client: (1) buys 100 shares of XYZ on June 1, 2010 (2) sells the 100 shares of XYZ on February 1, 2011 for a loss, and (3) then repurchases 100 shares of XYZ on February 15, 2011. The sale on February 1, 2011 was a sale of noncovered securities so the wash sale will not be reported and the basis of the shares purchased on February 15, 2011 will not be adjusted when those shares are sold. This adjustment will be included on the Form 8949 worksheet when the shares purchased on February 15, 2011 are sold.
• Incorrect Holding Period for Covered Securities: Form 1099-B reports the holding period adjusted to the holding period of a covered security sold with a wash sale loss disallowed. The Form 8949 worksheet will provide an adjustment to the holding period of a noncovered security sold with a wash sale loss disallowed.
• Please refer to IRS Publication 550 and the Instructions to Schedule D (and Form 8949) for more information.

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WHFIT Tax Information Statement

Additional information for owners of Widely Held Fixed Investment Trusts (WHFITs) is reported on a separate tax information statement. WHFIT securities include unit investment trusts, royalty trusts, commodity trusts and HOLDRS trusts. IBKR is required to report all income from WHFITs gross on Forms 1099 to the IRS and to you. In many cases this amount will be more than the actual cash received in your account. In some cases, income may be reported on Form 1099 when no cash distribution was made from the WHFIT. The IRS requires that income be reported in the gross amount, including any expenses deducted by the WHFIT prior to a payment. Income (and expenses) must also be reported based on when it was received or incurred by the WHFIT, and not when it is distributed to shareholders.

The WHFIT tax information statement shows the gross amount reported to you on Forms 1099 (dividends, interest, OID, royalty or principal amounts) as well as expenses, including investment interest, foreign taxes and investment expense that have been withheld by the WHFIT from your payments.

For royalty and commodity WHFITs, only the gross income amounts and net income amounts are reported. For tax information on these WHFITs visit the website for the particular WHFIT security.

The WHFIT Tax Information Statement will be available by March 15 for the immediately preceding tax year. View and print the statement by accessing IB’s website, selecting Account Management or Client Portal from the Login menu and opening Tax Forms in the Report Management menu or the Reports menu.

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Canadian NR4 – Statement of Amounts Paid or Credited to Non-Residents of Canada

The NR4 reports Canadian Source income paid to a non-resident of Canada during the year from which Canadian tax has been withheld by IBKR. The value of Canadian payments reported on your NR4 may differ from the total value of distributions that are shown on your account statements due to return of capital distributions, which are not required to be reported on an NR4, in accordance with Canadian taxation laws.

Investment income including dividends, interest, Canadian unit trust income, mutual fund distributions and capital gains paid by Canadian securities to nonresidents are reported in box 16 or box 26. Canadian tax withheld is reported in box 17 or 27

Canadian tax is generally withheld at 30%, however a tax treaty may lower this rate.

If you are a US citizen, your Consolidated 1099 from Interactive Broker (IB) includes Canadian dividends and tax withheld.