1099 Season – An Opportunity for Tax-Aware Advisors

2022 was a banner year, and not in a good way. It was only the third time in 100 years that both stocks and bonds ended the year lower. (The previous times were in 1931 and 1969!). Needless to say, this made for a challenging year for investors, no matter what equity-to-fixed-income ratio they had in their portfolios.

To add insult to injury, many taxable investors also saw significant capital gain distributions from their equity and bond mutual funds, which will mean a tax bill in April in addition to the uncomfortable market performance many experienced.

Some investors are discovering the not-so-good news when they receive their 1099-DIV forms. But in every problem lies an opportunity, so here’s how advisors can take this negative news and potentially make it advantageous for clients and prospects.

Three steps to help you uncover and win assets during 1099 season

Step 1. Compile a list of clients and prospects you know who might have non-qualified assets. If you need help, think of clients who may have mentioned any of the following to you in past meetings and conversations:

  • The sale of real estate
  • The sale of a business
  • Deferred compensation
  • Inheritance (i.e., Stretch IRAs)
  • Insurance proceeds
  • Trusts
  • Receiving RMDs
  • Current taxable assets in mutual funds

These clients could potentially have assets in investments that are paying capital gains, dividends, interest, etc., causing an unwanted or unnecessary tax bill, and may be good candidates for a 1099 conversation.