The reason for investors receiving corrected 1099's stems predominately from provisions of the 2003 Tax Act, in which congress attempted to lessen the impact from the double-taxation of dividends. Specifically, when corporations earn a profit, they pay taxes on that profit. When the company's stockholders receive their share of those profits in the form of a dividend, it is taxed again, hence the term, "double-taxation."

The 2003 Tax Act lowered the maximum tax rate on dividends to 15%. However, congress inserted one caveat; in order to qualify for the 15% tax rate, the shareholder's company must have paid taxes. Corporations, just like individuals, do not know their tax liability until their tax returns are completed. Once completed, those companies that didn't pay taxes because they operated at a loss (which causes their dividends not to qualify for the lower tax rate) informed the investment firms as to their new status. Subsequently, financial institutions sent out corrected 1099's each time they were alerted.

After receiving numerous complaints over a number of years, the IRS decided the best way to significantly reduce the number of corrected tax statements was to authorize a delay in the date required to mail out 1099's.