How to reconcile income on the statement to the Form 1099 Composite 

How to reconcile income on the statement to the Form 1099 Composite 

Each year, advisors and end-clients attempt to reconcile the December statement to the tax form.

While Schwab does not recommend comparing the two documents, it's important to understand the difference between statement reporting and tax reporting:

  • December statement—The Income Summary in the statement provides an estimation of the tax reportability of the income received during the calendar year.
  • Form 1099 Composite—The tax form reports the actual tax reportability of the income, which may not have been received during the calendar year.
End-client's December monthly statementAccess on the Documents tab under Statements, Inserts & Account Documents
End-client's Form 1099-DIV, 1099-INT, and 1099-MISC (included in the 1099 Composite)Accessed on the Documents tab under Tax Forms
  1. Locate the Income Summary section in the statement.
  2. Obtain the following tax forms, if available:
    • 1099-DIV
    • 1099-INT
    • 1099-MISC
  3. Compare the income reported in each category of the Income Summary to the available tax form. For details, see the Income Summary breakdown.

    Note: Do not use the Dividends and Interest category (in the Cash Transactions Summary section) for tax planning purposes. For further details, refer to the FAQ section below.

  4. Research any items with discrepancies. The most common reasons for discrepancies are below.
ReasonDetails
All or part of a dividend paid in January is taxed in the prior calendar yearSince the dividend was paid in January, the income cannot be included on the December statement. If Schwab knows the transaction is for the prior year, it will be indicated on the January statement.
The tax status of the distribution may have changed in the time since the statement was createdThis most often occurs when an issuer reclassifies the tax status of the dividend after year-end. For example, if the issuer releases information in February indicating all or a portion of a dividend that was paid in December will be taxable in the following tax year.

If you have questions about cost basis reporting, statement preferences, and tax reporting, contact your service team or call  Advisor Services Cost Basis Service Tooltip at 877-762-6446.

Resource: Sample 1099 Composite and Year-end Summary

Why shouldn't the Dividends and Interest category included in the Cash Transactions Summary section of the statement be used for tax planning purposes?
The Dividends and Interest category Tooltip reports various distributions which may or may not be taxed the same as dividend and interest income.

For example, income from a cash liquidation is included, but is not taxed like an ordinary dividend. In addition, some but not all transactions resulting in taxable interest and dividends are reported in this category. All such transactions are included in the Income Summary.

For details, see Tax reportable items comparison.

Why don't the figures in the Income Summary match the Dividends and Interest category included in the Cash Transactions Summary section?
The Income Summary provides an estimation of the tax reportability of the income received during the calendar year, whereas the Dividends and Interest category reports income received into the account in the calendar year. There are multiple scenarios when tax reportable items are not posted in the Dividends and Interest category but are included in the Income Summary.

Introduction to tax forms