With Thanksgiving wrapped up and the New Year just a month away, you’ll need to prepare yourself to think about something a little less festive: taxes on your investments.
While there are many forms of investment taxes, I’m talking strictly about capital gains taxes. Whether an accountant usually prepares your taxes additionally get your taxes or you take the Do-It-Yourself approach, it’s important and empowering to understand what forms you’ll need to gather, what they mean, and where they’ll end up. Here’s a quick guide to lessen your capital gains tax anxiety.
First, figure out what brokerage forms you need
Whether you use an online stock trading brokerage, a brick-and-mortar investing firm, or a real estate company, these third parties will normally provide you, via email or mail, with the forms you’ll need to file your taxes. So, before January 1 hits, be sure to have your address and emails up-to-date with your brokers, advisors, and whoever else you’ve invested with this year.
Here are some common forms you’ll need to gather:
- 1099-B: Your brokerage should provide this. It’ll detail your capital gains and losses from 2018 through the brokerage.
- 1099-DIV: If you used an investment fund company, they’ll send you this explaining our dividends.
- 1099-S: Bought real estate this year? Make sure your broker sends you this form detailing the transaction(s).
Sometimes third parties may not send you the forms at the beginning of the year. If they’re slacking, just shoot them a call or email to see if they can expedite your paperwork. If you want more information, the IRS’s website actually does a great job explaining each form’s role.
Then, decide what IRS forms you’ll need to file
Now that you understand the forms above, it’s important to understand what forms from the IRS you’ll need to file. I find this to be true even if you aren’t filing your own taxes. Even accountants can make mistakes and, sometimes, taxes get sent back to your home by the IRS for revisions. It’s frustrating to get taxes sent back and feel completely helpless because you don’t understand the forms. Lets’s fix that.
- Form 8949: Report trades of any asset on this form. Fill out as many as necessary.
- Schedule D (Form 1040): Here, you’ll write down your totals from Form 8949.
For most, these will be all of the papers you’ll need to keep track of. Of course, you’ll have to decide if you want to use an accountant, a certified tax preparer, or take the DIY approach, but at least you’ve made the first steps in understanding how to file your capital gains taxes.
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