Author Topic: After tax stock investing and tax returns question  (Read 2339 times)

Dee18

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After tax stock investing and tax returns question
« on: September 10, 2014, 12:08:06 PM »
Okay, this is  a bit embarrassing.  I have been putting off investing after tax dollars in VTSAX (my favorite mutual fund) because I do not know how to handle reporting that income (assuming it is not a loss) on a tax return.  All of my mutual funds are currently in retirement accounts so I haven't had to worry about reporting any earnings on them.  My after tax money is in CDs, so I report the the earnings just as income.  I know this is crazy as the CDs (even at 3+ %) are not keeping up with inflation and I am paying a higher tax rate than I would for capital gains.  Am I making a mountain out of a molehill? Will Vanguard send me a year end form that makes this easy?  Is there a best time to do this to make the tax return aspect easier, such as last day of the year?  Not sure why I am hung up on this, but I know some kind souls on this forum will educate me.

Cheddar Stacker

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Re: After tax stock investing and tax returns question
« Reply #1 on: September 10, 2014, 12:15:35 PM »
It's not much different than the form you get from the CD (1099-INT). Vanguard or whoever would send you a 1099-INT, 1099-DIV, 1099-B, These are for interest, dividends, and sales of stocks.

If you don't sell anything there will be very little tax consequence. You don't pay any tax on changes in value, you only pay on dividends, sales, interest, or sales within the fund itself. Nothing to worry about, go ahead and do it whenever you're ready and don't worry about the tax aspect.

seattlecyclone

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Re: After tax stock investing and tax returns question
« Reply #2 on: September 10, 2014, 12:17:05 PM »
Yes, Vanguard will send you (and the IRS) a form at the end of the year. It will contain a summary of how much dividend income you received, how much of that income counts as qualified dividends, how much short/long term capital gain income you had (for any shares you purchased within the past few years; previously brokers weren't required to keep track of your cost basis), how much foreign tax was withheld from dividends, basically anything you need to know. Capital gains used to be a little bit harder to report before brokers had to keep track of your cost basis and purchase date. For shares you purchased since then, it's quite simple.

Nothlit

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Re: After tax stock investing and tax returns question
« Reply #3 on: September 10, 2014, 01:34:51 PM »
Yes, it's pretty simple as the replies above have indicated. The only other small caveat I can think of, if you weren't already aware, is that you still have to pay taxes on dividends that were automatically reinvested. It's easy to forget that you technically received dividends if they were automatically reinvested and never passed through your hands as cash, but that's still a taxable event. Not a big deal, really, just something to keep in mind.

Dee18

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Re: After tax stock investing and tax returns question
« Reply #4 on: September 10, 2014, 06:25:22 PM »
Thanks so much for the replies! I'll move over some of that cash right away.

red7

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Re: After tax stock investing and tax returns question
« Reply #5 on: September 10, 2014, 09:08:04 PM »
Just want to say thank you for asking this! I have been hesitant to invest my sizable cash stache for the exact same reason....I was anxious about the tax implications and what kind of information I might have to keep up with on my own (and whether I could do that to the IRS' satisfaction). Now I have no reason to put this off one single additional day!

chasesfish

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Re: After tax stock investing and tax returns question
« Reply #6 on: September 11, 2014, 04:50:40 AM »
Yes to what everyone else said.  On top of it, if you use a tax software it'll import the data right from Vanguard.