Tax Forms Every Investor Should Know

in Investing by

KEY POINTS
  • Plan ahead for tax day with this form-by-form guide of 1099 forms, broken down by investors.
  • Understand what you need for a 1099-B versus a 1099-OID.
  • Beware of filing the same form twice and keep copies for future reference.

The dreaded Tax Day is looming! But if you plan ahead, there’s no need to panic. Tax forms and filings are not as complicated as you may think. I haven’t met anyone who enjoys filing their taxes, but I can say from my own experience that the more you learn about what each form is for, the easier the entire process gets.

When I first started filing my taxes, I wasn’t a very active investor. The more involved in the markets I became, however, and the more I started to diversify my income streams, the more tax forms I received. It was a bit confusing at first, but once I understood why I was getting so many different forms, everything made a lot more sense.

Taking just a few minutes to understand what some of the most common investor tax forms are for can get you off to a great start this tax season.

Primary Reasons Investors Receive Tax Forms

What does the government want to know about your investment portfolios and assets? It’s pretty straightforward. Some of the most common events that need to be reported include:

  • Capital gains and losses (ex. selling stocks)
  • Dividends (ex. cash dividend income received on ETFs)
  • Interest paid (ex. home mortgage and student loan interest)
  • Interest income (ex. money market, savings, bond and CD interest received)
  • Distributions (ex. from retirement, profit sharing, and HSA plans)
  • Royalties, rents, and other non-employee compensation (ex. rental property income and contracting work)
  • Real estate sales (ex. selling your house)

Common Tax Forms For Investors

So just how does all of this information get reported to the IRS? Typically after each calendar year completes, banks, brokers and other institutions generate tax forms that report any relevant events that occurred during the prior year.

Many of the forms used are known as 1099 tax forms. There are several different variations of 1099 forms depending on the type of event that took place and the associated account type. Firms submit one copy of each form to the IRS and another to each account holder.

Here are some of the most common 1099 forms that investors often receive.

1099-B: Capital gains or losses from trades on publicly traded securities such as stocks and ETFs are reported on 1099-B tax forms. The “B” stands for broker or barter exchange, which can help you remember what it’s for. Details such as short-term versus long-term gains or losses are displayed, as well as other important transaction information including your cost basis, date of sale, ticker symbol, quantity sold, gross proceeds, and federal tax withheld.

1099-DIV: Did you receive any dividend payments in your portfolio last year or get a capital gains distribution on one of your mutual funds? Be on the lookout for a 1099-DIV form. You probably already guessed that DIV stands for dividend. If you held any foreign securities domiciled outside the U.S., any foreign taxes you paid are reported on this form. The 1099-DIV also reports ordinary dividends separately from qualified dividends, and specifies if you had any state or federal taxes withheld from your distributions.

1099-INT: When you see a 1099-INT, remember the word “interest” since this form reports interest income. Banks, savings institutions, and brokerage firms typically generate these forms when you receive interest payments in your accounts. Common account types that receive interest income include checking, savings, money market, CD’s, U.S. savings bonds, and investment accounts holding interest-bearing securities.

1099-MISC: You guessed it – MISC stands for miscellaneous. This form is used to report various types of non-employee compensation. Examples include money earned as an independent contractor, royalty income, prize monies, awards, and rental property income.

1099-OID: If you purchased a bond or note for an amount less than face value last year, you could receive a 1099-OID, which stands for Original Issue Discount. This form reports when the redemption price or face value of your investment was higher than its issue price. Some examples of when you might receive a 1099-OID include income from zero-coupon bonds, T-bills, or peer-to-peer lending.

1099-R: Typical reasons investors could receive a 1099-R include distributions from retirement plans, profit-sharing, annuities, pensions, insurance contracts, and disability payments. You should receive a separate 1099-R for each account and distribution code. If you rolled over an employer-sponsored plan into an IRA, you should also expect to receive Form 5498, which should balance out the distribution reported on your 1099-R.

1099 Consolidated: If you had an account with multiple events in the same year, you may receive what is called a consolidated 1099 form. Just like it sounds, a 1099 Consolidated takes multiple 1099s forms and compiles them all together into one file. For example, one year I received a consolidated 1099 statement that included a 1099-DIV, 1099-INT, 1099-B, and a 1099-OID combined in one pdf.

Due Dates For Important Tax Forms

If you had any relevant activity in your investment accounts last year, you’ve probably already received several 1099 forms in the mail. Remember to check all of your forms for accuracy because the sooner you catch an error, the easier it is to receive a corrected form well before you need to file your tax return.

This handy table breaks down common tax forms for investors and when they are typically due to be postmarked and filed with the IRS, generally between February 1 and March 31.

If your 1099 forms never came, don’t worry. Unlike W-2s, they aren’t required to be filed with your return (except for 1099-R) so if you know how much you earned, simply report the relevant income when you file. If you’re unsure how much you need to report or want to get an official copy for your records, contact the sender to check on the status.

Just be careful that the issuer doesn’t accidentally send you an incorrect form in the process or a brand new form that could make the IRS think you earned twice as much.

Plan on collecting all your forms in one place so you can quickly reference them when it comes time to sit down and prepare your tax return. The less time you have to spend hunting down forms and completing your return, the happier you’ll be!

Further Reading:

The Ultimate Tax Guide To Maximize Investment Returns – Find out the five most important tax issues for investors and helpful ways you can save.

How The Average American Can Pay No Taxes – Check out four examples of people earning between $30,000 and $150,000 a year who don’t pay any taxes. Perhaps you could be next!

The Most Lucrative Ways To Spend Your Tax Refund – Expecting some money back this year? Here are four ways you could turn your tax refund into a lot more money.

The following two tabs change content below.
Rebekah Curry

Rebekah Curry

Rebekah has over 13 years of experience in financial services and more than six years in online publishing. She loves to help others through her writing and specializes in finance, career and lifestyle topics. Travel, photography and diving are a few of her many interests. Having set foot in 30 countries and counting, she loves to go off the beaten path and seek out hidden gems.

7 comments

  1. Jenny

    I love how most forms are accessible online now. Makes things so much easier! This year I got two 1099-INTs and a 1099-B.

    Reply
  2. Rebekah

    I agree Jenny! I’ve had a couple tax forms get lost in the mail in the past, which was quite an inconvenience. Fortunately almost all of my forms were in the cloud this year and the few that I received by snail mail didn’t get lost.

    Reply
  3. Allie

    I think what would be more helpful than explaining the forms we receive would be to explain which forms we need to file when we receive these forms. There’s not really any actionable information here.

    Reply
    • Rebekah

      Perhaps that can discussed in a follow up post. The first step is to understand which forms you should receive, as explained in this post. It’s impossible to explain everything about taxes in one article. For example, the IRS themselves admit it’s a challenge to figure out how long the tax code is. There were over 500 changes in 2008 alone and more than 3,250 changes to the tax code since 2001. Tax regulations are about a foot thick! And the CCH Standard Federal Tax Reporter, which is a publication summarizing changes and administrative guidance for tax professionals is nine feet long! You can read more about it here: irs.gov/pub/tas/08_tas_arc_msp_1.pdf

      Reply
  4. Keith

    I look forward to doing my taxes every year. I request all the tax forms and worksheets be mailed to me by the IRS, then I sharpen my #2 and enjoy the feeling of adding, subtracting, and multiplying each row by hand. It only takes me a couple of hours, but I learn so much more about how I could have sold/bought things differently to reduce my taxes for next year.

    Reply
    • Rebekah

      I love your attitude Keith. I agree that doing your own taxes and digging into the numbers yourself is an incredible learning experience and can provide a lot of insights into ways to improve tax efficiency.

      Reply
  5. Fayne

    Hi Rebekah, thanks so much for the comprehensive article. Do you happen to have any knowledge around FinCEN 114’s and how to file? Does Personal Capital have any resources we could look at for that? Ty in advance!

    Reply

Leave a Reply

Your email address will not be published.

Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.