Tax Help - Form 1099-B on Consolidated Statements

Taxpayers who do a significant amount of investing in the stock and bond markets might have an account with a brokerage company for the purpose of executing transactions and managing his or her investment portfolio.

In addition to providing clients with the required tax reporting statements each year (Form 1099-DIV, 1099-INT, 1099-OID, 1099-B, etc.) brokers usually provide each client with a detailed consolidated report of all aspects of his or her account.

The year-end statements provided by financial brokers are a valuable source of information for tax professionals to accurately prepare your yearly returns.

Companies design their reports differently, but in general, most provide the client with the following additional information:

• A listing of dividends and other corporate distributions by security, and the dates distributions were made;


• A listing of taxable and nontaxable interest income by security, and the dates the income was paid;


• A statement of accrued interest on debt instruments sold or purchased during the year;


• A detailed record of trading activity for the year, identifying sales, redemptions, principal payments, and other transactions;


• A detailed record of purchases during the year;


• A detailed list of cost basis of assets sold during the year.

Review these types of documents carefully. It is very easy to overlook a single item when you are going through a consolidated form that is several pages long.

Highlight all items that require entry on your tax return and check off items as you enter them.

Missing an item may cause the IRS to review the entire return.

Tax Debt Help - Strategies for Your Investments

Five strategies to bring in the New Year.

Your investment and tax planning should go hand in hand. The time is now to review your financial situation and make needed adjustments that can help save you money at tax time. Here are a few year-end tax-smart investment tips to consider:

1. Review your portfolio.

See if it is time to trim some non-performing investments and rebalance.

Do you have any capital losses carried forward from your 2005 income tax return?

Capital losses can offset capital gains to reduce your tax bill. If you have a gain from the sale of stock this year, you may want to consider selling other stocks that will generate a loss if they no longer fit your needs. You can claim up to $3,000 in capital losses against ordinary income on your tax return.

If you did sell stock this year, you'll need to give your tax professional the cost basis of the stock in order to determine your capital gain or loss. Your financial advisor can help you find that information.

2. Maximize your contributions to company sponsored retirement plans.

Consider contributing up to the amount that your company will match. Your contributions are made pre-tax, which reduces your adjusted gross income (AGI) and overall tax bill.
3. Make eligible IRA contributions.

You must make any eligible 2006 IRA contributions prior to April 17, 2007. The maximum contribution for both Roth and traditional IRAs is $4,000 in 2006; $5,000 if you are over age 50.

4. Take required minimum distributions.

If you are over age 70½, make sure you take the required minimum distributions from your IRA or other retirement plans by December 31, 2006.

If you don't take the required distribution, you will owe a 50 percent penalty for what you should have taken plus ordinary income tax.

If you turn age 70½ in 2006, you have until April 1, 2007 to take your first distribution.

Your financial advisor can help you determine whether 2006 or 2007 is the best year for you to take your first distribution.
5. Be aware of the alternative minimum tax (AMT).

Talk to your tax professional about preparing a year-end tax projection to determine if you might be subject to the AMT. This is especially critical if you plan to exercise stock options, which could trigger this tax.

S. Raines, Sr. Financial Advisor/Tax Preparer