Common tax questions and answers

In general, the Internal Revenue Service (IRS) begins accepting tax returns around the last week in January. The deadline to file an individual tax return is typically April 15, unless that date falls on a weekend or holiday. Need an extension? The deadline to request one is generally tax day, too; then, your return will be due on or about October 15.

It’s form 4868.

It depends on how you’re employed and your financial transactions in a year. For example, if you work for someone else, you’ll receive a W-2. If you work for yourself, you’ll get a 1099. If you’ve received a distribution from a retirement account, watch for a 1099R. Check with your tax advisor for specifics.

Most tax documents are mailed between January 1 and February 15, with a few exceptions. Find a full list of tax documents.

Taxable income is simply money you’ve received that you must pay taxes on. It may come from a variety of sources such as a job—whether you’re self employed or work for someone else—or from withdrawals from a taxable retirement account.

RMDs are taxable, and there are rules about when you have to take one. When you turn 73, you have until April 1 of the following year to take your first RMD. Then, you must take an RMD by December 31 every year thereafter.

In general, contributions to an HSA are due the same day as tax returns.

In general, contributions to an IRA are due the same day as tax returns.

No. 

The contributions to a Roth IRA have already been taxed, so once you reach age 59½ you may make withdrawals, tax free.

In general, contributions to a 529 or educational savings account are due the same day as tax returns.

Learn more about why you receive a 1099R and what it means.

There are three possible reasons:

1. You didn’t roll the money over into another traditional IRA within 60 calendar days of the date you received it.
2. You requested a direct rollover from an IRA to another qualified account. In this case, it’s not taxable; look for a distribution code of “G” on the form.
3. You removed an excess contribution from your IRA prior to filing your tax return. In that case, only the earnings are taxable.

On box 2b, look for a check at “Taxable amount not determined.” IRAs can have nondeductible contributions made using income that has already been taxed. In this case, special rules apply when figuring the tax on distributions. (See IRS Publication 590 for additional information.)

This form reports contributions, rollovers, and the fair market value of certain accounts, such as individual retirement accounts (IRAs).

This form reports employer contributions to a SEP-IRA and contributions made to a SIMPLE IRA for the year they are actually deposited to the account, regardless of the tax year for which they are made.

If you sell your shares of securities in a fund’s portfolio for more than their original cost, you may have a capital gain. If you sell them for less, you may have a capital loss. In general, any redemption or exchange of shares is considered a sale of shares.

When a mutual fund sells a holding, it receives any profit or capital gain that results from the sale. Mutual funds, by law, must pay nearly all gains to shareholders in the form of capital gains distributions. These distributions, which typically happen once a year, are made for tax reasons.

Gains and losses on mutual fund shares held for one year or less are deemed short-term. Shares held for one year or longer are deemed long-term. Short-term capital gains are included with your other ordinary income and are taxable at your marginal tax rate. Long-term capital gains are generally taxed at a 15% tax rate.

Cost basis is typically the purchase price of your mutual fund shares, including any sales charges paid when your shares were purchased. It’s used as a benchmark to determine if you have a capital gain or capital loss when you sell or exchange your shares in the future. These gains or losses need to be reported to the IRS on federal tax returns.

For shares acquired after January 1, 2012 (covered shares), mutual funds are required to track and report all gains or losses from the sale or exchange of shares in taxable accounts. This information is provided on a 1099B to both you and the IRS. For shares acquired before January 1, 2012 (non-covered shares), you will be responsible for calculating and reporting your gains and losses at tax time. For covered shares, you can choose how you want to report your cost basis for each account you hold.

A wash sale is defined by two things:

• You sell shares at a loss and purchase shares (including reinvested dividends) in the same fund, regardless of the account.
• The sale is within a 61-day period, beginning 30 days before the sale and ending 30 days after the sale.

The loss is disallowed for tax purposes and must be added to the cost basis of the repurchased shares. IRS Publication 550 has more information on wash sales.

For tax purposes, exchanges are treated the same as if you had sold your shares in one fund and used the cash to purchase shares in another fund. So, the tax rules that apply to redeeming shares and calculating gains and losses apply when you exchange them.

Yes. If there is a capital gains distribution, you’ll receive a 1099DIV, which indicates the distribution as taxable income.

Yes. Tax-exempt funds are exempt from federal taxes only. However, a portion of a tax-exempt dividend may be state tax exempt, depending on the state in which you reside. Your 1099DIV includes a supplement with rules that apply to states.

Your year-end statement will include the amount of dividends that were paid to you throughout the year.

Yes. If you have a tax-exempt fund, the dividends are federally tax-exempt and not reported to the IRS. However, these dividends should be reported on a 1040. You'll also have to report them on your state tax return. Use your year-end statement to find the amount paid to you.

Some funds that invest in foreign stocks and meet certain requirements choose to pass on foreign taxes to their shareholders. In these funds, a gross dividend is reported to each shareholder, and you’re allowed to offset that income with a credit based on foreign taxes paid by the fund. This credit is subject to limitations and can make tax reporting complex. You’ll receive a letter stating all foreign tax amounts with your 1099DIV. Contact your tax professional for questions regarding your foreign tax paid credit.

Ordinary dividends are paid out of earnings and profits from a corporation or a mutual fund and are considered ordinary income—not capital gains. These are reflected in box 1a of a 1099DIV.

Qualified dividends are the ordinary dividends subject to the same 15% (0% for shareholders in the 10% and 15% tax brackets) maximum tax rate that applies to net capital gain. These are reflected in box 1b of a 1099DIV.

AMT is an income tax imposed by the federal government on certain individuals, corporations, estates, and trusts. Refer to 1040 instructions and 1040A instructions on the IRS website to determine if you are subject to the AMT.