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I generally have my taxes done by mid January when my W-2 becomes available, but I'm often stuck waiting as long as another month before I can file because I'm waiting for my brokerages to send me my 1099s. This happens across TD Ameritrade, Options House, and Fidelity, so it's not just limited to one bad brokerage.

All of the information that is reported on my 1099s, both for personal and retirement accounts, is available via real time reporting in each brokerage's web interface. There is nothing on a 1099 that shouldn't be available from a simple SQL statement that barely changes from year to year.

I understand why deadlines in February may exist for small businesses doing these calculations by hand. But given that every brokerage's DB and software can obviously handle pulling this information in real time from a production database, why does it take over a month for them to send their 1099s to individuals, even via paperless statements? Is there something additional that needs done before these forms can be sent to clients that requires all of this time, or is this just a matter of bureaucratic inefficiency?

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    What's the broker's incentive to send the forms early (before the deadline)?
    – quid
    Feb 14, 2017 at 18:19
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    @quid Capitalism. If I found a broker that sent our 1099s by January 14th every year, I would consider transferring my accounts. That certainly wouldn't be the only factor driving such a decision, but if I were already unhappy with my existing brokerage (I am), that would certainly help push me over the edge.
    – Nicholas
    Feb 14, 2017 at 18:27
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    @quid That's a good point, but I'd disagree on the last part of your reasoning. We only know that none of them think it is a good consumer motivator, or that they believe it is not worth the cost (details of said cost was the crux of my question). But we don't know if it actually would be a motivator until someone offers and advertises it.
    – Nicholas
    Feb 14, 2017 at 18:39
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    And I don't know where you're going to get 8% return, and the return is taxable. If you're waiting on such an apparently large return it would probably be more beneficial to just adjust your W4 exemptions.
    – quid
    Feb 14, 2017 at 19:05
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    @Nicholas: If you're getting around $5K as an income tax refund, you really need to adjust your withholding. Because an average $4K invested for a full year is a lot more than the $50 you worry about. And seriously, I doubt that very many people want to file their tax return in January.
    – jamesqf
    Feb 15, 2017 at 3:35

2 Answers 2

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There are probably many correct answers to this question, but for most people, the main reason is qualified dividends. To be a qualified dividend (and therefore eligible for lower tax rates), the dividend-paying stock or fund must be held for "more than 60 days during the 121-day period that begins 60 days before the ex-dividend date". Since many stocks and funds pay out dividends at the end of the year, that means it takes until mid- to late February to determine if you held them, and therefore made the dividend qualified. Brokerages don't want to send out 1099s in January and then possibly have to send out revised versions if you decide to sell something that paid a dividend in December that otherwise would have been qualified.

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    This makes a lot of sense to me. It also explains why some brokerages provide access to 'preliminary' or 'tentative' 1099s prior to the 'final' 1099. I've never seen the final one different, probably because I've never sold a dividend producing stock near the new year. Thank you.
    – Nicholas
    Feb 15, 2017 at 17:13
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The simple answer is that brokerages have to close the books at the end of the year before they can send out the tax forms (what this entails is off topic for this site). I doubt that printing and mailing the forms takes very long. It is simply the process of reconciling the books so they don't have to send out corrected forms if errors are corrected during that reconciliation process.

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  • Not only close the books, but also do everything else that each brokerage firm does every day of the year. While preparing/mailing "a" 1099 could probably be done in a minute, doing many thousands of them takes a bit more time. Most likely, they're done on a schedule, e.g., names that start 'A' are done one day, then 'B', etc. And then the Postal Service has to handle them, at the originating end, in transit and on the destination end. Minor disruptions are also likely at multiple points.
    – user2338816
    Feb 15, 2017 at 13:51
  • @user2338816 I understand your point. However, I work for a multinational organization doing web dev and DBA work on a site that handles millions of users. I've generated quality scores, that probably require more number crunching than a 1099, for our entire user base in single a night. And electronic delivery would be immediate. I can't believe that generating even millions of electronic 1099s by January 3rd could seriously tax any correctly designed database.
    – Nicholas
    Feb 15, 2017 at 17:11
  • @Nicholas Well... yeah. But it's pretty obvious that either the OP, like many (most?) others, hasn't opted in for e-delivery or the subject brokerage doesn't offer it. So it hardly matters how quickly it could be done.
    – user2338816
    Feb 17, 2017 at 8:03

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