Tax season is upon us! Some people look forward to it and most people hate it. The question one must ask is, "Do I have to hate tax season?" To help remedy tax season stress, Scottrade has included a Frequently Asked Questions section on the back of the 1099 form. This section will answer many of those tough and sometimes irritating questions, which will in turn save you time and money researching an answer elsewhere. If this form does not answer your question directly, it will give you recourses to find your answer. Tax season doesn't have to be difficult.

Do you want to get ahead of the game and beat stress before it beats you? Check out the FAQ section here.

How do I know if my dividends are eligible for the reduced "qualified" rate?

To meet the holding period requirement, a shareholder must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. According to the IRS, the responsibility for certifying whether a dividend is eligible for the reduced "qualified" rate lies with the individual investor. When Scottrade reports a dividend as potentially qualified, it does not necessarily mean you can claim it as such on your individual tax return. Please refer to the 2008 IRS Instructions for Form 1099-DIV for more detail.

Do my investments affect whether I can file my tax return early?

If you received 2008 income on mutual funds, exchange-traded funds (ETFs) and/or real estate investment trusts (REITs), please consider the following facts when making your determination on whether to file your tax return early with the IRS. It is commonplace for mutual funds and REITs not to report final tax information until well after the January 31 mail date imposed by the IRS. This is because such entities are not required to determine final taxability of distributions until sixty days after the end of their fiscal year, which may be later than January 31. If and when updated tax information becomes available from the fund, Scottrade is required to send affected customers a revised 1099. The activity detail portion of the revised document will denote with an asterisk (*) any change(s) to taxability.

Why don't I see Options on my 1099?

Option (call/put) transactions are not 1099-reportable by Scottrade; however, for your convenience they are listed under Supplemental Information.

How are my short sales reported to the IRS?

The IRS mandates that short sale activity be reported on a 1099-B by trade date, not settlement date of the sale. Even if a short position established in calendar year 2008 is not closed out until the next calendar year (2009), Scottrade is still required to report in the year of the trade date (2008).

Why don't I see my zero net sales proceeds on my 1099?

Sale proceeds that net to zero (on worthless securities) will not appear on a 1099. You will need to use your trade confirmation or monthly statement for proof of the sale.

Where is my cash-in-lieu (CIL) of fractional shares figure reported?

Scottrade is required to report CIL if the amount paid for each individual transaction is $20 or more. The figure will appear on your 1099-B under "Sales Proceeds".

Where is my dividend claims information?

Reporting dividend claims is not required by Scottrade; however, for your convenience they are listed under Supplemental Information.

Is my Real Estate Investment Trust (REIT) income taxed?

REITs are typically tax-exempt at the corporate level, meaning the income will not qualify for the lower tax rate; however, long-term capital gains often qualify for the 15% capital gains tax rate.

How are my American Depository Receipt (ADR) distributions reported?

American Depository Receipts (ADRs) represent ownership of underlying foreign stock, at a particular ratio. ADRs trade on a U.S. exchange and offer U.S. investors access to foreign markets. Some distributions paid to your Scottrade account may actually represent sale of rights proceeds on foreign rights offerings not open to U.S. investors. The agent sells the ineligible rights on a "best-effort" basis and distributes the pro-rata sales proceeds to ADR holders. These proceeds are reportable as a sale on a 1099-B.

How do "spillover" dividends work on my tax forms?

For Regulated Investment Company (RIC) and Real Estate Investment Trust (REIT) dividends that are declared with a record date in October, November or December of 2008 but not payable until January of 2009, Scottrade is required by law to report the dividend as paid in 2008. Refer to the 2008 IRS Instructions for Form 1099-DIV for more detail.

Can I report substitute payments as dividends?

Payments received in lieu of dividends (substitute payments) on loaned-out margin shares are not qualified dividends. Such cash payments lose the tax characteristics of the dividend and are reportable in Box 8 on a 1099-MISC.

How do I calculate my cost basis?

It is the investor's responsibility to determine gain/loss. One useful resource provided to Scottrade customers is GainsKeeper®, a cost basis program available on our trading Web site. You may also consult your outside tax advisor.

How are my Scottrade Certificates of Deposit (CDs) reported?

Scottrade offers certificates of deposit (CDs) that may be traded on a secondary market ("brokered" CDs). As a result, we are required to report the sale or maturity of your CD on a 1099-B. Bank CDs are different from brokered CDs and do not have to follow this IRS regulation, since bank CDs are nontransferable, held in customer name and cannot be sold on a secondary market.

Do I need a 1099 for my corporate accounts?

Scottrade is only required to report aggregate substitute payments in-lieu of dividends of $10 or more paid to corporate accounts in Box 8 on a 1099-MISC. Otherwise, the firm is not required to issue composite 1099s for corporations; they are exempt from 1099 reporting. Please refer to your monthly and/or annual statement (mailed approximately the second week of January) for any necessary information.

Does the return of capital on my Canadian Mutual Fund Trust apply to me?

Canadian mutual fund trusts often publish information detailing the reallocation of the year's dividends into return of capital. This reallocation information is usually for Canadian investors only. If the trust does not specifically issue return of capital information explicitly for U.S. investors, the income will be reportable as a dividend. Reallocation information for U.S. investors is usually not available until mid- to late March of the following year. If income is reallocated for U.S. investors, Scottrade will issue a revised 1099.

How is my Real Estate Mortgage Investment Conduit (REMIC) income reported?

Scottrade's REMIC 1099-OID form, mailed by March 16, 2009, includes the original issue discount (OID) amounts that are being reported to the IRS and a separate "Original Issue Discount Detail." Scottrade is required to report REMIC interest and OID on an accrual basis (income earned, not income paid). As a result, the interest figures on your REMIC 1099-OID might not match the year-to-date interest listed on your account statements. You will need to consider these full REMIC 1099-OID figures when completing your tax return.

What is an Original Issue Discount (OID)?

A long-term debt instrument generally has original issue discount (OID) when it is issued for a price less than its stated redemption price at maturity. OID is the difference between the redemption price and the issue price. The IRS considers OID to be a form of interest that accrues on an annualized basis. Scottrade is required to report an investor's full OID amount on a 1099-OID, without regard to any secondary market purchases. According to the IRS, "A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. If so, the OID reported to you on Form 1099-OID may have to be adjusted." For additional information, consult your outside tax advisor or IRS Publication 1212: Guide to Original Issue Discount (OID Instruments).

How does Master Limited Partnership (MLP) income work?

Publicly traded partnerships generally do not pay taxes, but instead pass income/loss directly to the partners (investors). An individual's pro-rata share of income/loss is reported on a Schedule K-1, which is mailed to investors directly from the general partnership itself and designates where to report the partnership income. The cash distributions made to your Scottrade account is supplemental information under MLP Distributions. The amount of the distribution may not equal the amount of income reported on the K-1 form, since partnerships may claim a number of deductions (such as depreciation). MLP investors can expect to receive K-1 information from the general partnership at any time, depending on when the partnership finalizes its tax return. Scottrade has no control over the timing/content of K-1 forms.

Who do I contact with 1099 questions or requests?

Please contact your local Scottrade branch office for further assistance. The branch phone number is conveniently located on the first page of your 1099. Please keep in mind that Scottrade does not provide tax advice; consult your professional tax advisor for assistance, or visit www.irs.gov.

Other Helpful Resource:

2008 Scottrade Tax Guide - 1099 Help

This annual guide discusses general topics regarding Scottrade's completion of Internal Revenue Service (IRS) tax forms for customers.

Scottrade does not provide tax, legal or investment advice and the information provided is for informational purposes only. Customers should consult their tax or legal advisor(s) for questions regarding specific tax issues.