Free Investment Tax Planning Guide, Tips, & Help

What are qualified dividends?

Qualified dividends are dividends that are eligible to be taxed at a lower tax rate. Enter the full amount of your dividends in Box 1a as Ordinary Dividends. Then enter the amount of qualified dividends in Box 1b. Qualified dividends are only a designation for determining how to tax the amount of ordinary dividends in Box 1a.

So if you enter 1000 in Box 1a as ordinary dividends, and you enter 600 in Box 1b as qualified dividends, only $1,000 will end up on your tax return as income. The $600 in qualified dividends will make it so $400 of your dividends are taxed at normal rates, and $600 of your dividends are taxed at a lower rate.

What is the total sales amount?

If you sold stocks or bonds and you received Form 1099-B from your broker, enter the amount shown in Box 2 of Form 1099-B for the sales amount. If you paid commissions on the sale, you would either reduce the sales amount by the amount of the commissions, or you would add the commissions paid to the cost basis of the asset sold. Either way works out the same for the net gain or loss. If you have Form 1099-B, you'll want to use the sales amount shown in Box 2 of Form 1099-B so that what you report as sales matches what your broker reported to the IRS.

What is the total cost or basis?

In general, the cost or other basis is the cost of the property plus purchase commissions and improvements. If you inherited the property, the cost basis is usually the fair market value of the property on the date of the decedent's death, but special rules can apply. If you received the property as a gift, the cost basis is usually the same cost basis of the person who gave you the gift.

For example, if your mother gives you 100 shares of ABC stock, your cost basis would probably be whatever your mother paid to purchase the 100 shares of ABC stock. Special rules apply if the value of the property is less than the donor's cost basis.

What if I don't know the cost basis of the stocks sold?

Where do I report dividends from my credit union?

Report credit union dividends as interest income. Credit union dividends are treated as interest income and not dividends.

Don't enter IRA, 401(k), or retirement plan investment income.

If you have an Individual Retirement Account (IRA), 401(k), 403(b), or other type of tax-deferred retirement plan account, the interest income, dividend income, capital gains, and any other type of investment income earned in the retirement account are NOT reported on your tax return.

What if my 1099-DIV only has an amount in Box 8 or Box 9?

Liquidating distributions are distributions you receive during a partial or complete liquidation of a corporation. If your 1099-DIV only has an amount in Box 8 or Box 9, you do not enter the information on the 1099-DIV web page. If it was a partial liquidation, there is nothing to report on your tax return. You adjust the cost basis of your stock or mutual fund by the amount of the partial liquidation shown in Box 8 or Box 9, then when you eventually sell the stock you will use the lowered cost basis as the purchase price of the stock.

If the liquidating distribution shown in Box 8 or 9 is a complete liquidation, then report the amount in Box 8 or 9 on the stock sale screen as a stock sale. For example, if your cost basis in stock in a company is $1,000 and the company is totally liquidated, then if you receive a 1099-DIV with Box 8 showing $400 and you received nothing else from the liquidation, then you would report the stock as a sale on the stock sale screen and report $400 as the sales price and $1,000 as the cost basis in the stock that was completely liquidated.

What if I have expired options?

If you purchased options that expired without being exercised, enter zero as the sales price and the date of the expiration as the date of sale. Enter the cost basis and date purchased. On the next screen there will be a question that asks if the sale is for expired options. Answer Yes to that question on the next screen and the sale will be properly noted as expired options on your tax return.

What if I didn't receive a 1099-INT, or I lost my 1099-INT?

If you know the amount of interest income you received, just enter the name of the bank or other institution from which you received the interest income and the amount of interest income you received. Many times, year-end statements or other documents besides the 1099-INT will show the amount of interest income you received for the year. You can call your bank or broker to find out the taxable amount of interest income you had for the year.

What are capital gain distributions?

Mutual fund companies report your share of the mutual fund's capital gains on Form 1099-DIV as capital gain distributions. Capital gain distributions are different than ordinary dividends in that they are eligible for the reduced tax rate for stock gains.

What is tax-exempt interest?

Tax-exempt interest income consists of interest received from city or state bonds (municipal bonds).

What if I have worthless stock?

If you had stock that became worthless in 2013, treat the worthless stock (has no value) as being sold on the last day of the year for a sales price of zero. Enter the cost basis (amount you paid) of the stock and the date it was acquired. Enter December 31, 2013 for the date sold since worthless stock is considered to be disposed of on the last day of the year.

What are capital loss carryovers?

If you have more capital losses than capital gains in previous years, a capital loss carryover can be used on your 2013 tax return. Look at Schedule D lines 15 and 16 of your 2012 tax return. If Schedule D lines 15 and 16 are losses, then you might have a capital loss carryover to 2013. Use the Capital Loss Carryover Worksheet in the 2013 Schedule D instructions to calculate the amount of the carryover, and whether it is short-term or long-term.

Basically, if you weren't able to use your capital loss on last year's tax return then you can use it this year. For example, if your taxable income was zero last year (income minus deductions and exemptions) then you didn't get any benefit from the capital loss so the capital loss carries over to this year's return.

Another example would be if your capital loss was more than $3,000 and you didn't have any capital gains to offset against the capital losses. You can only deduct a maximum of $3,000 of capital losses on your Form 1040 each year. Any capital losses more than that carry forward each year until they are all used up.

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