Today I Learn… I make a point of learning something new everyday. This is what I learn each day

1, Feb 14, 2012

Edward Jones, Devonshire, and IRS Troubles

Filed under: Finance — admin @ 12:53 am

This happened in the past and it happens again this year. In the past, Edward Jones sent a 1099 form to IRS reporting an “Uncosted Proceeds” that we had gained, which is both erroneous and irresponsible. IRS chased us down handing us a huge bill plus penalty and interest for failing to report this amount of income. This so-called uncosted proceeds is a redemption that we made from our investment.

The amount reported represents the interests and the capital that we initially invested with after-tax saving. When I contacted Edward Jones about this reporting, I was told that since I transferred money from an outside account, they didn’t know the initial cost base of my investment. That’s why they use the term “Uncosted.” I told EJ the term was very misleading and open to interpretation. To an average person, it means nothing but a gain that has not costed us anything, which is not the fact.

But it is useless to argue with EJ. Because, according to IRS, it is up to me to provide all the documents and to prove we don’t owe the amount of tax that IRS demands. The initial investment was made as early as year 2000. EJ has created a hell of trouble for me. I told EJ that I was going to spread the word and let everybody know the great job the EJ has done to me.

Below is the 1099 form Devonshire Associate has sent to IRS for the so-called “Nonemployee compensation” in the amount of $6550. It means we have to pay tax¬†on this compensation. In reality, this amount is a refund for a deposit we put in. Now, don’t they know refund and compensation are two totally different things? Of course, they do. Classifying it as a compensation to us means an expense to them, which they can claim for tax reduction as business expense. I guess they look at my foreign sound name and expect us to be so dumb that we cannot figure out what to do with it and leave it to IRS to hang us down years later.

The take-home message for all is you cannot trust any company to do the right thing or to take care of your interest. You got to watch closely what these companies send to IRS if you want to avoid any potential troubles.



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