2019 Feb 1099 Forms and 2019 Feb The A, B, C & D of Medicare and 2019 Feb Commission vs. Flat Fee

by rwilczek on Feb 15, 2019

1099, tax forms, Medicare, part A, Part B, Part C, Part D, advisory, fees, fee, advisory fee

It’s important to note to your CPA regarding the 1099-R, which reports distributions from IRAs and retirement plans, if it’s coming from a ROTH IRA.

The 1099 issuer does not differentiate between a taxable distribution and a ROTH distribution so you will need to do so.

No one wants to pay more tax than what they owe, so please let your CPA know if you received funds from a ROTH last year.

Thanks and be well.

Rita

1099 Forms
Explaining these ubiquitous forms and their uses.

Provided by Rita Wilczek

What is a 1099 form? This is a record of payment from an individual or entity, showing a payment, generated for your records. The individual/entity sends a copy to both the payee as well as the I.R.S.¹

Who might be sending 1099s? Clients send their freelancers 1099s, recording work performed. Banks send 1099s to reflect interest from a savings account. A state may send a 1099 for a tax refund. If the financial institution who handles your retirement account writes you a check, they will also send you a 1099.¹

In any event, a 1099 includes the taxpayer identification number or Social Security Number of the payee. Receiving the 1099 does not automatically mean that the payee owes tax, as there could be situations that offset that income, but it definitely means that the I.R.S. also has a record of that payment.¹

There are many types of 1099 form. Here are a few of them:

1099-A. This form is a consequence of foreclosure or bank repossession of secured real property – “acquisition or abandonment,” in I.R.S. terms. Lenders send it to the foreclosed party and the buyer.¹

1099-B. Brokers and barter exchanges report proceeds from securities, futures, commodities, or barter exchange transactions with a 1099-B.¹

1099-C. The 1099-C reports debt cancellation. You must claim the indicated amount on the 1099-C form as income in the year the debt was forgiven. When you pay income taxes on that amount, the creditor cannot come after the debt again. This form sometimes follows a foreclosure.¹

1099-CAP. This one is for those who own shares in a corporation that has been acquired or has undergone a significant change in capital structure. If it was sold or changes have been made where you’ve earned cash or stock, for example, this form would be necessary.¹

1099-DIV. When you receive dividends, capital gain distributions, or liquidation distributions, you get one of these. For example, when a mutual fund sells off funds and realizes a capital gain, the fund informs you of your share of the capital gain through a 1099-DIV.¹

1099-G. This form reports payments from government agencies and qualified state tuition programs – everything from state and local tax refunds and unemployment benefits to agriculture payments, gambling winnings, and taxable grants. It is usually issued to show unemployment benefits or a state tax refund.¹

1099-INT. This form reports interest income of $10 or more, and sometimes other tax items related to interest income (such as federal tax withholding or early withdrawal penalties).¹

1099-LTC. As the LTC part hints, these forms report distributions (payments) from long term care insurance contracts and accelerated death benefits paid out as a result of a life insurance contract or a viatical settlement.¹

1099-MISC. This category includes “miscellaneous income,” including awards and prizes.¹

1099-OID. The 1099-OID reports the difference between the stated redemption price of a bond at maturity and the issue price of that bond.¹

1099-PATR. This form reports patronage dividends, such as in a farm cooperative.¹

1099-Q. Have you been paying for school expenses from a 529 plan or a similar savings plan? Withdrawals will be reported on this form.¹

1099-R. The 1099-R reports distributions from all types of retirement, pension, and profit-sharing plans as well as any IRA or annuity contract.¹

1099-S. The 1099-S reports gross proceeds from real estate transactions or exchanges.¹

1099-SA. This form reports distributions from Health Savings Accounts (HSA), Archer Medical Savings Accounts (Archer MSA), or Medicare Advantage Medical Savings Accounts (MA MSA).¹

Questions? Are you thinking you should have received one of these forms? Or maybe sent one of these forms? Be sure to talk with a qualified tax professional or qualified financial professional today; they can help you generate, request, and understand the 1099 forms in question.

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - nerdwallet.com/blog/taxes/what-is-a-1099-form/ [8/22/18]

The A, B, C, & D of Medicare

Breaking down the basics & what each part covers.

Provided by Rita Wilczek

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover and where they come from.

Parts A & B: Original Medicare. There are two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long and only under certain parameters.^1,2

Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $170.50 daily coinsurance payment may be required of you.²

Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (hospital beds, wheelchairs), and other medical services, such as lab tests and a variety of health screenings.¹

Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level. The standard monthly premium amount is $135.50 this year. The current yearly deductible is $185. (Some people automatically receive Part B coverage, but others must sign up for it.)³

Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums. To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (October 15 - December 7), seniors can choose to switch out of Original Medicare to a Medicare Advantage plan or vice versa; although, any such move is much wiser with a Medigap policy already in place.^4,5

How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you. You pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect. These plans no longer offer prescription drug coverage.⁶

Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.⁷

Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.⁸

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

Citations.

1 - mymedicarematters.org/coverage/parts-a-b/whats-covered/ [1/29/19]

2 - medicare.gov/coverage/skilled-nursing-facility-snf-care [1/29/19]

3 - medicare.gov/your-medicare-costs/part-b-costs [1/29/19]

4 - medicareinteractive.org/get-answers/medicare-basics/medicare-coverage-overview/original-medicare [1/29/19]

5 - medicare.gov/sign-up-change-plans/joining-a-health-or-drug-plan [1/29/19]

6 - medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap [1/29/19]

7 - ehealthinsurance.com/medicare/part-d-all/medicare-part-d-prescription-drug-coverage-costs [1/29/19]

8 - https://www.medicare.gov/drug-coverage-part-d/what-drug-plans-cover [1/29/19]

Commission vs. Flat Fee
Which is right for you?

Provided by Rita Wilczek

As an investor, you face some potentially tricky choices. Defining your risk tolerance, long term, and short term goals, and of course which type of financial professional is best for you. Do you intend to work with a professional who is commission based? Or would you prefer a flat-fee business model? As usual, the answer isn’t as obvious as some may think. It’s important to remember that there is no one-size-fits-all model and making an informed decision is the best way to arrive at a solution that works for you.

The Fee-only Model. A fee-only financial professional collects a flat fee, usually a set retainer or hourly rate. Fee-only professionals usually have a fiduciary duty to their clients over their broker, dealer, or other institution. This means they must always put your best interests first, and they are legally required to only sell investment products that support this goal.¹

The Hidden Cost. It may seem counter-intuitive, but a Fee-only model can end up being costlier in some situations. Imagine during your planning process that your fee-only financial professional discovers you don’t have disability income insurance and recommends you purchase a policy. There’s just one problem; they aren’t licensed to sell insurance. By the time you find an insurance broker and purchase coverage, you’ve paid not one, but two additional fees: one to your financial professional and a commission charge to the insurance broker. (This is a hypothetical example used for illustrative purposes only. You should consider the licenses and credentials of a financial professional before implementing a strategy.)²

The Commission Based Model. Financial professionals that are paid by commission do so from purchasing and selling stocks, ETFs, and bonds. In short, their compensation is derived from executing transactions on behalf of their clients' portfolios. Just like financial professionals who operate on a fee-only model, commission based professionals have a fiduciary duty to their clients. One thing to keep in mind is that investment firms generally require a minimum trade charge, which can vary depending on the firm. Finally, although this is not universally true, financial professionals that charge a commission tend to focus almost exclusively on managing their clients’ portfolios.³

How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k), or life insurance policy may be your spouse, your child, maybe another loved one, or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away.

Commission Based for Long-Term Investors. Working with a commission based professional may be the most cost effective option for those who are long term investors. This can be seen in the commonly used buy and hold strategy many commission based models recommend. Commission based advising can often be the best choice for those who don’t need ongoing advice and are mainly self-directed, financially savvy investors. (A buy-and-hold strategy is one approach to investing. Investors should consider their ability to continue with the strategy during periods of market volatility. The return and principal value of stock prices will fluctuate as market conditions change. Shares, when sold, may be worth more or less than their original cost.)⁴

Which is right for you? The answer is complicated and depends entirely on your unique situation. Before making any major choices, an informed conversation with your financial professional after evaluating your financial goals and strategy may help you discover which model is best for you.

Rita Wilczek may be reached at (952) 542-8911 or rwilczek@hirep.net

www.ritawilczek.com

Citations.

1 - investopedia.com/articles/basics/04/022704.asp [1/2/19]

2 - smartasset.com/financial-advisor/what-do-financial-advisors-do [5/15/18]

3 - investopedia.com/articles/investing/102014/feeonly-financial-advisers-what-you-need-know.asp [3/28/18]

4 - kiplinger.com/article/retirement/T023-C032-S014-fee-or-commission-for-financial-advice-what-s-best.html [2/28/17]