Schwab 1099 Reconciliation Process

Each year, around the beginning of March, we produce reports that reflect the taxable income activities in your accounts during the preceding tax year.

Also each year, in mid February, some of you become concerned about the status of these reports. After some thought, it seemed appropriate to let you know, what happens behind the scenes before our reports are sent out to you and your accountant.

Beginning in mid-February, we compare our portfolio management system’s record of all income paid in the previous year against the Schwab 1099 reports. Why do we wait so long? Though the IRS requires Schwab to issue 1099 reports by January 31, many mutual fund companies do not classify their distributions correctly in time for this deadline. Most of the funds report by the third week in February, which then forces Schwab to issue, corrected 1099’s.

Because of this, we do not start reconciling your 1099’s until mid to late February. This year we made over 2,000 adjustments to account for the changes posted by Schwab in 2007 for the 2006 tax year. Once these changes are made, we print out our portfolio management system reports and copies of the Schwab 1099 reports and reconcile each account to verify that they match what Schwab has reported. When we find a Schwab error that is not in your favor, we follow up with them until they issue you a new 1099.

Furthermore, our experience tells us that some taxable bonds may be reported as non-taxable and vice versa, and we will identify these bonds in our reports. This year, the reconciliation process took over 80 man-hours to complete.

This is another area where our service rises significantly above our competitors’. In our research of services provided by other financial advisors and wealth managers, we found that most do not offer this service, or do so upon request only or charge a fee.