Got Bonds? You May Need To File A 1097-BTC Form At Tax Time
It is tax time again – that magical season where you take the annual plunge into a sea of white and black forms, grinding out precise, pointlessly complicated filings and accountings, and leafing through stacks of laws, revisions, policies and updates just to make sure nobody – especially the IRS – takes any notice of your finances. Wait, what's that you say? What do you mean you're not excited for it?
Hey, no one likes doing their taxes (except maybe accountants like these folks) – especially those people with any kind of investments more complex than a standard retirement account. If you happen to be an investor with a diversified portfolio, and you dealt with certain kinds of investor tax credit bonds this year, such as clean renewable energy bonds or Build America bonds, you may have to file a 1097-BTC with the IRS – especially if you stripped and sold the tax credits.
Bonds are a kind of loan wherein a purchaser gives the seller money, then the seller pays interest (usually over a period of time) before returning the principal at the end of the bond period. Tax credit bonds are an attractive investment instrument for some investors because they can receive tax credit instead of interest, and can turn around and sell those tax credits separately from the bond (this is what is known as stripping.) This is a somewhat rarefied financial transaction – there aren't too many average Americans that have to deal with these things, unless they are investors or government contractors – but if you happen to be one of them, it is important to know what paperwork you are responsible for.
Many bonds are negotiable and end up traded on the secondary market. If you elected to receive tax credit instead of interest on a bond you purchased, whether directly or through a hedge fund, then turned around and sold it, it is likely you are going to have to file a 1097-BTC form with the IRS and the buyer of the tax credit. Check with your portfolio manager or broker, or visit a site like 1099fire.com, which has specialized 1097-BTC software to help you complete the form in compliance with all applicable tax laws and IRS policies.
If you think you might have to file a 1097-BTC form this year, but you have questions, there is plenty of help available online – don't hesitate to send an e-mail or pick up the phone! It's better to be safe than sorry, especially when it comes to dealing with the IRS.
Hey, no one likes doing their taxes (except maybe accountants like these folks) – especially those people with any kind of investments more complex than a standard retirement account. If you happen to be an investor with a diversified portfolio, and you dealt with certain kinds of investor tax credit bonds this year, such as clean renewable energy bonds or Build America bonds, you may have to file a 1097-BTC with the IRS – especially if you stripped and sold the tax credits.
Bonds are a kind of loan wherein a purchaser gives the seller money, then the seller pays interest (usually over a period of time) before returning the principal at the end of the bond period. Tax credit bonds are an attractive investment instrument for some investors because they can receive tax credit instead of interest, and can turn around and sell those tax credits separately from the bond (this is what is known as stripping.) This is a somewhat rarefied financial transaction – there aren't too many average Americans that have to deal with these things, unless they are investors or government contractors – but if you happen to be one of them, it is important to know what paperwork you are responsible for.
Many bonds are negotiable and end up traded on the secondary market. If you elected to receive tax credit instead of interest on a bond you purchased, whether directly or through a hedge fund, then turned around and sold it, it is likely you are going to have to file a 1097-BTC form with the IRS and the buyer of the tax credit. Check with your portfolio manager or broker, or visit a site like 1099fire.com, which has specialized 1097-BTC software to help you complete the form in compliance with all applicable tax laws and IRS policies.
If you think you might have to file a 1097-BTC form this year, but you have questions, there is plenty of help available online – don't hesitate to send an e-mail or pick up the phone! It's better to be safe than sorry, especially when it comes to dealing with the IRS.
