Fidelity Investments sucks! They misreported my income to the IRS. Anyone have a similar experience?

Question

I'm trying to get them to correct their mistake, but navigating their bureaucracy is impossible. Misreporting W2 and 1099 must violate some law. I'm thinking of hiring a lawyer, but would like to avoid the cost. Any good suggestions on how to get Fidelity to clean up their records and get the IRS off my back?

Answer 1

It is EXTREMELY common for brokerages to issue incorrect 1099s and correct them later. They have a deadline set by law to issue 1099s. But they often don't get the numbers right the first time, especially when tax rules are in flux. Tax year 2006 was a prime example of this. Each of my brokerages corrected their 1099s at least once, and some twice.

The best advice for avoiding this problem is not to file your tax return too early. Wait until April (or even longer if you file an extension) until the flow of corrected 1099s stops.

Answer 2

Fidelity doesn't offer tax advice, so if you misunderstand the tax documents they produce, they probably aren't going to be of much help.

If you can't make sense of the 1099's sent to you, you are not alone. The documents sent can be confusing and it isn't always apparent what is a tax document and what is not. In addition, many people do not understand what is taxable inside an investment account.

If you would present all your Fidelity documents, the tax returns in question, and any correspondence that you have received from the IRS to a professional tax preparer, they will go over it and advise you what is correct. They will prepare a response to the IRS, or file an amended return for you.

I have had Fidelity accounts for 30 years and have never had an incorrect document from them, but that is my experience and I won't say that a mistake is impossible.

Answer 3

Sorry, but I'll bet dinner at Ruth's Chris that it's YOUR foul-up, not Fidelity's! My bet is that you sold off some investments and didn't properly file the transactions on Schedule D.

When you sell off stocks or mutual fund shares, the broker cuts a Form 1099 for the gross proceeds of the sale. It's up to you to list them properly on Schedule D to account for your original cost, the purchase and sales dates and calculate the capital gain. If you fail to do that, the IRS assumes that your cost was zero since they don't have that information availble to them. They also assume that it is short-term CG, again as they don't have that information.

Unless you are employed by Fidelity, they had nothing to do with your Form W-2.

You need to file an amended return using Form 1040-X and attach a properly completed Schedule D with all transactions properly listed. THAT will get the IRS off you back. Don't waste your money on a lawyer, they'll tell you the same thing. So would a first-year accounting major taking Taxes-101.

It's not Fidelity that sucks, it's your knowledge of tax filing procedures!

To Brian S below: I've unwound dozens of these screwups and have yet to enounter a bad From 1099 from any of the major investment houses. That's not to say that they don't exist, I'm sure that they do, but the odds are that it's the taxpayer who is at fault, not the IRS or the brokerage house. That's why dinner is on me at Ruth's Chris (or the Chop House) if I'm wrong. ;)

Answer 4

Bostonianimo, you're making a lot of assumptions about what the problem is. The question doesn't give us enough specifics.
Does the IRS know that you think that the 1099 information is incorrect? Make sure they know and request their help. The IRS has a bad reputation, but can actually be helpful sometimes.

Answer 5

If it truly is an error, Fidelity should issue a corrected 1099.

Is it their error or do you just not understand the rules?

Answer 6

Try H&R Block next time; they really know what they are doing. And if they screw you over, you are covered because it's an h&r block error. But if it's your fault, then you have to cough up the cash.

But it's still a better choice for taxes and tax advice.