Calling all taxpayers affected by the Bernie Madoff Ponzi scheme!
A few weeks ago we detailed the steps you should take to file your 2008 tax return this April. Because unfortunately, you still have to file something with the Internal Revenue Service.
At that time, we were told that Irving H. Picard, the court appointed trustee of the Bernard L. Madoff Investment Securities [BLMIS], said he would issue Form 1099s to all clients who received a 2008 distribution.
Form 1099 is the tax form that reports any distributions, interest and dividends that you received from the fund in 2008. Technically, whatever is reported on that form is taxable income to you and must be then reported on your 2008 Form 1040.
Well apparently Picard changed his mind.
In a recent press release, Picard said he will NOT issue Form 1099s, says Alan Weiner, CPA, JD, former president of the Society and on several tax committees.
Here’s a statement from the release:
“Because there are questions about the accuracy of the BLMIS financial records and the Trustee’s experts and staff have been unable to assure the Trustee of the complete accuracy of those records, the Trustee is not in a position to prepare and furnish information on interest, dividends or securities transactions for the accounts of BLMIS customers for the 2008 tax year.”
My response to that: Duh!
Ok. But more importantly, now what do you do? How do you file your tax return, even if you received income from Madoff Securities in 2008?
You don’t report it. It’s that simple.
Don’t blow it off, though. Attach an explanation to your tax return as to why you are not reporting any of the income you received, suggests Weiner.
Now, things could get a bit more complicated if the trustee decides to issue 1099s later in the year and folks are then forced to amend their returns and report that income. But let’s take one step at a time. Most pros believe it’s going to take years before they figure out if there was any taxable income at all.
These missing 1099s aren’t just headaches for the individuals involved. There are partnerships and feeder funds that are also waiting for 1099s to report their distributions. And they’re not getting them either.
Total mess.
So for now, just know that you don’t have to report the distributions received from Madoff Securities in 2008, but you do need to attach an explanation to your tax return explaining why.
And then be sure to reread the original story we wrote with all the other “taxing” details.
And don’t panic. Things may get a bit thorny as we go forward, but no worries, we’ll be here to help.
Frist endowment lost $1M to Madoff scheme
How to Recover From a Market Meltdown if You’re Retired
FOXBusiness.com’s Week in Review: Feb. 9-13, 2009
