Introduction to tax reporting

Introduction to tax reporting

To meet state and federal requirements, Schwab sends you and your clients various tax documents throughout the year. This article describes these documents, how to access them, and key dates.

If specific recommendations that relate to a client’s particular circumstances are required, contact an Internal Revenue Services (IRS) representative or a tax advisor.

Key information related to tax reporting on Schwab Advisor Center®:

  • To provide clients’ Form 1099 tax information as early as possible, the form is mailed in two waves, depending on the types of investments your clients hold.
    • Early February – first wave (date is subject to change)
    • Mid February – second wave (date is subject to change)
  • Schwab may send additional required IRS documentation to your clients, if applicable. This documentation could be tax forms or tax letters.
  • For your convenience and that of your clients, Schwab also provides an Account Summary Report for corporate and pension trust accounts not sent to the IRS.
  • Your firm can access electronic tax reports as PDF documents on Schwab Advisor Center and can download and archive client tax reports by master account.
  • Tax reports for the nine prior tax years are available at an account level in a PDF format in the Documents tab on Schwab Advisor Center for linked sub accounts.
  • Multiple reports can be bundled together in a single download at the master account level.
  • Tax Report alerts can be set up to notify advisors when a new tax report is available. See How to work with alerts for more information.

For information regarding tax withholding, retirement distributions, and more, refer to the following details:

Foreign tax withholding

U.S. citizens and residents (U.S. persons) are subject to U.S. taxation on their worldwide income, including income derived from foreign countries. U.S. persons may also be taxed by foreign countries on certain types of income and gains derived abroad. If the U.S. maintains a tax treaty with the applicable foreign government, beneficial owners of certain accounts may be eligible for a reduced preferential rate Tooltip if all parties are U.S. persons. Preferential rates are not available in all markets.

For U.S. taxable accounts, foreign tax paid amounts are reported on Form 1099-DIV or Form 1099-INT. We strongly suggest that account holders consult a tax advisor familiar with their circumstances to determine how to report foreign tax paid on their U.S. tax returns.

For more information about reporting foreign tax paid, see IRS instructions for Form 1116, Foreign Tax Credit, and IRS Publication 514, Foreign Tax Credit for Individuals.

Keep these additional details on foreign tax withholding in mind:

  • Taxpayers may obtain a greater benefit by claiming a credit instead of a deduction Tooltip .
  • Foreign taxes may have to be paid on foreign investments in a mutual fund.
  • The Canada Revenue Agency (CRA) requires that special tax forms be completed by taxpayers to confirm all beneficial owner(s) of the account are entitled to receive the reduced rate of tax provided by the treaty between the U.S. and Canada on all income derived from Canadian securities. These forms can be found in the Documents tab on Schwab Advisor Center.

Income tax withholding from retirement account distributions

When your clients request a distribution from a retirement account (other than a qualified Roth IRA), they may elect to have federal income tax withheld from the distribution.

Thirty-nine states and the District of Columbia either allow or require state income taxes to be withheld from retirement account distributions by residents. Other considerations for income tax withholdings relating to retirement account distributions include minimum withholding amounts, state withholding regulations, changing state withholding Tooltip , moving to another state Tooltip , and clients who choose not to withhold Tooltip . See How to request a retirement distribution and the Retirement Plan Timetable for more information.

Widely Held Fixed Investment Trust (WHFIT) reporting

WHFITs are fixed investment trusts (meaning the original holdings of the trust are not changed or rebalanced) held by at least one third-party rather than by the trust owner. Examples include unit investment trusts, royalty trusts, commodity trusts, Holding Company Depositary Receipts, and mortgage-backed securities. Income is reported based on when the trust receives payments from the underlying assets, rather than when the holders are paid the income disbursed from the trust. Dividends, interest, and principal payments earned by the trust in the fourth quarter may be reported on Form 1099-B for the current tax year, even if the payments are actually made in the following tax year. Therefore, the dollar amount and/or dates of reported payments may not coincide with the information on the client’s monthly statements. To see a copy of the WHFIT insert clients will receive, view Widely Held Fixed Investment Trust (WHFIT) reporting requirements.

For information regarding IRS Form 1099-B versus the Realized Gain or Loss (RGL) included in the Year-End Summary (YES) section of the Form 1099 Composite, refer to the following table:

1099-B vs. Realized Gain or Loss

Type of TransactionsRGL*Form 1099-BDescription
Sales with proceeds equal to $0.00YesNoSale will appear on the RGL but not on the Form 1099-B. Proceeds will report as $0.00, and a realized loss will appear on the RGL.
Worthless securitiesYesNoEvent will appear on the RGL but not on the Form 1099-B. Proceeds will report as $0.00, and a realized loss will appear on
the RGL.
Cash in lieu (CIL)Yes$20.00 or moreForm 1099-B does not report CIL unless it is $20.00 or more. However, the RGL will report CIL, regardless of the amount.
Option assignments–call and putYesNoThe individual call/put assignment does not appear on the Form 1099-B but will be displayed in the Options Activity section of the YES. The option assignment of a call or put will not appear on the Form 1099-B or RGL as a separate transaction.

In the case of a call, the sale transaction of the underlying security will be displayed, and the option premium will be added to the proceeds of the sale. In the case of a put, the transaction will not appear on the RGL. However, if the underlying security (purchased as a result of the option assignment) is subsequently sold, cost basis of the purchase, minus the amount of the option proceeds, will be reported on the Form 1099-B and displayed on the RGL.
Option Contracts** (Long or Short call and puts) - expired or closedYesYesOption contracts that expire or are closed will appear on the Form 1099-B and RGL.
WHFIT principal paymentsNo


Yes
Yes


Yes
Partial Principal Payments on WHFIT securities do not appear on the RGL, but do appear on Form 1099-B.

Final Principal Payments on WHFIT securities do appear on the Form 1099-B and RGL.
Short-term debt instrumentsYesYesThe proceeds and cost basis are provided on the RGL but are not reported on the Form 1099-B.

*More transactions appear on the RGL than are on the Form 1099-B. However, total proceeds (RGL) and Box 1d, sales price of stocks, bonds, etc., on the Form 1099-B should match, with the exception of the items listed in the table.

**Covered under the cost basis legislation.

How to customize Schwab reporting
How to request a retirement distribution
How to set up clients with paperless documents
How to work with alerts
Introduction to cost basis reporting
Introduction to Personal Trust Reporting services

See the following tools and resources to assist you with tax reporting on Schwab Advisor Center:

Cost Basis: A Comprehensive Guide for Schwab Advisors

Client reporting tools

The following are resources to help you talk about tax reporting with your clients:

Contact information

  • Advisor Services Cost Basis Service provides advisor support for cost basis reporting, statement preferences, and tax reporting. Contact Advisor Services Cost Basis Service at 877-762-6446 or via a Schwab Advisor Center service request for cost basis reporting, statement preferences, and tax reporting questions:
    • Cost basis:
      • Topic: Cost Basis and Statement Support
      • Subtopic: General Cost Basis Research
    • Statement support: 
      • Topic: Cost Basis and Statement Support
      • Subtopic: General Statement Research
    • Tax reporting: 
      • Topic: Send a Message
      • Subtopic: Tax Reporting
  • For questions about 1099R and 5498, contact your Service Team.
  • For IRS-related information, go to irs.gov.