About this time of year (and for the next month or so), you might receive a corrected Form 1099 from your broker. Despite presumably their best efforts it is common for some types of investments to make corrections, especially when it comes to allocating the fund income between dividends, qualified dividends, capital gain distributions, and nontaxable return of capital. So why does that happen and what can you do to avoid problems with the Internal Revenue Service?

It happens because mutual funds are complicated. A mutual fund is made up of lots of other investments, so before the mutual fund knows its own income for the year they need to receive that information from the various investments. Then the mutual fund needs to aggregate all of that information and give the info to your broker. Allocating everything Read More