Tax Preparation Guide for Heritage Clients

Tax season can be quite, well, taxing! Every year we compile a comprehensive tax preparation guide for Heritage clients. This guide is a handy reminder of the many variables that affect your tax filing, and ways to navigate through them effectively.

1099 Composite and Year-End Summary

Consolidated 1099 tax forms are available online from Schwab and TD Ameritrade. You should also receive a hard copy of all 1099s in the mail during February or early March. Corrected forms may be generated by reclassification of income by mutual funds and could be produced several weeks after the original 1099.


2016 1099-Rs for distributions from IRAs have been released by Schwab and TD Ameritrade. If you were expecting a 1099-R for an IRA withdrawal or IRA to Roth conversion but did not receive one, please contact your advisory team at Heritage. If Federal or State income taxes were withheld from your IRA distribution the 1099-R will reflect those amounts. If you used an IRA distribution for a charitable donation, please see the important note below.

IRA Qualified Charitable Distributions (QCD)

If you were age 70.5 or over in 2016 and facilitated a distribution to charity from your IRA, please inform your tax preparer. Forms 1099-R for IRAs do not specifically indicate that a QCD was used for some or all of a required minimum distribution. A manual adjustment is required to denote the non-taxable QCD.

Investment Management Fees

You may be able to deduct fees you paid for managing your investments that produce taxable income as miscellaneous itemized deductions on Schedule A. You can claim the amount of expenses that is more than 2% of your adjusted gross income.
• For Schwab, advisor fees are listed on the 1099 Composite and Year-End Summary near the end of the report on a page entitled “Summary of Fees & Expenses”
• For TD Ameritrade, please see the management fee on the “Fees & Expenses” page of the Consolidated Form 1099

Investment Related Expenses

In addition to management fees, you may be able to deduct the following investment related expenses as miscellaneous itemized deductions subject to the 2% of adjusted gross income limit:
• Subscriptions to financial publications
• Software or online services you use to manage your investments
• Safe deposit box rent, if used to store stock certificates of investment-related documents
• Transportation to your investment adviser’s office
• Attorney, accounting or clerical costs necessary to produce or collect taxable income
• Costs to replace lost security certificates

Margin Borrowing Interest

Margin loan interest may be a deductible investment interest expense. There is a cap on deductibility equal to your net investment income, but any leftover expense can be carried over to future tax years.
• For Schwab, reference margin interest on the “Summary of Fees & Expenses” page of the year-end summary
• For TD Ameritrade, please see margin interest paid on the “Fees & Expenses” page of the Consolidated Form 1099

April Deadline for 2016 IRA Contributions

The deadline for making 2016 IRA contributions is April 18, 2017. Even if you have an extension for filing your 2016 taxes, the deadline for a Traditional or Roth IRA contribution is not extended. You may not contribute to a Traditional IRA in the year you reach age 70.5 or any year after. You may continue to make Roth IRA contributions at any age, if you are otherwise eligible.

IRS Form 8606 for Non-Deductible IRA Contributions

If you made a non-deductible IRA contribution for the 2016 tax year, please remind your tax preparer. Form 8606 needs to be updated and filed with your return to keep track of basis within IRAs, to eliminate double-taxation upon withdrawal.

Spousal IRA Contributions

If you are married and file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did.

Catch-Up Contributions

If you turned age 50 in 2016, it is the first tax year you can contribute an extra $1,000 to your IRA or Roth IRA, before April 2017, as a catch-up contribution. The limit for those under 50 is $5,500; age 50 and older $6,500.

Roth IRA Contribution for Children

A Roth IRA offers tax free growth, making it a very attractive vehicle for young investors to take advantage of decades of compounding. If a child has earned income from a summer job or other work, a full or partial Roth contribution may be an option. Your child must have earned income, but he or she does not have to contribute the money to the Roth; you can fund the Roth IRA with your own money.

529 College Savings Plans

529 plan contributions are not deductible on Federal income taxes, but some states allow deductions or credits. Please inform your tax preparer of contributions you made to 529 plans.

Long-Term Care

Amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts may be included in deductible medical expenses. Please inform your tax preparer if this may apply or your expenses in this category changed in 2016.

Charitable Donations

Please make your tax preparer aware of any charitable donations you made via the transfer of stock or mutual funds. Your 1099 summary does not automatically provide this information.


If your portfolio contains a partnership investment that produces a K-1 tax form instead of a 1099, you will generally receive an estimated K-1 by the end of March or early April, before the April filing and extension due date. Final K-1s are normally released in August or September, before the mid-October deadline for those on extension.

Be sure to consult your tax professional about your unique situation, to make sure you’re taking full advantage of what’s available to you under the law. And no matter the time of year, it’s a good idea to check with your tax adviser before you enter into any transaction that might have significant tax consequences.