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Date: Wed, 13 Mar 2013 13:31:01 -0400
From: laurie@bivio.biz
Subject: [club_cafe] Amended 1099's
To: club_cafe@bivio.com

It appears we are getting to the point in the year where some of you are receiving amended 1099 forms.  Many times these show that an amount previously classified as a dividend is now being classified as a "non-dividend distribution"  Usually this is a Return of Capital.

Why do you get these?

Companies are only allowed to classify distributions as dividends if they have a certain amount of "Earnings and Profits"  This is a tax term.   It is calculated slightly differently than the GAAP earnings amounts you get on financial reports.   A company does not know if it has met the threshold until it closes and audits its books at the end of its fiscal year.  This can take a while, which is why you sometimes receive amended 1099's after February 15.  Often these are from companies whose finances are a bit more shaky.  If you follow the company closely,  you should have an inkling this might be a possibility.

If a distribution is not a dividend, it is not a distribution of earnings, but rather a return of some of your investment in the company.   That is why a Return of Capital distribution lowers your tax basis in your shares.

If you do get information where dividends have been reclassified as a return of capital, you need to edit your dividend entry in bivio and change it to a return of capital. If only part of your dividend has been reclassified, you might have to split each original entry into two.   If you've already filed taxes claiming the income as a dividend, you'll need to file an amended return to report it correctly.