Home
| Work & Business
| Investments & Stocks
| Mutual Funds
| Types of Mutual Fund Tax Documents
Types of Mutual Fund Tax Documents
by John Galt
-
Mutual funds allow individual investors to pool their investment capital within a fund run by a money management professional. According to Questia.com, more Americans invest via mutual funds than purchase stocks or bonds directly. When tax time arrives, many individual investors are confused when reviewing the various tax forms provided to them by their mutual fund company. A basic review of what each form is helps demystify the process of tax return preparation.
-
Form 1099-DIV
According to the IRS, Form 1099-DIV is used to report capital gains and dividend distributions. If your mutual fund manager sell a stock for a profit, then it must be reported to the IRS as a capital gain via Form 1099-DIV. Keep in mind that you owe tax on these reported capital gains even if you left your money within the mutual fund. This form is also used to report when stocks owned in your mutual fund pay a dividend. Form 1099-DIV allows you to ascertain your tax liability arising from investing activity done by the mutual fund manager on your behalf. Form 1099-DIV also shows you any foreign taxes paid by the mutual fund on your behalf. This is important because you can claim these foreign taxes paid as a deduction.
-
Form 1099-INT
Form 1099-INT reports to the IRS any exempt interest earned by you via your stake in the mutual fund. Examples of exempt interest are payments received from municipal bonds and other tax-exempt investments. This activity must be reported to the IRS even though you ordinarily would owe no tax on received exempt interest. In rare scenarios the Alternative Minimum Tax (AMT) requires that high-income taxpayers pay tax on interest income that would otherwise be exempt. For this reason, proceeds earned by you from exempt interest investments must be reported. You will not receive a Form 1099-INT if the amount of exempt interest received by you via the mutual fund is less than $10.
-
Form 1099-B
When you actually sell or redeem your shares in the mutual fund it might create a tax obligation. Consequently, all of your mutual fund share sales and redemption are reported to the IRS using Form 1099-B. Information from this form is used to assist you in filling out your Schedule D within your tax return. Form 1099-B also indicates whether any federal taxes were withheld by the mutual fund on your behalf.
-
Form 1099-R
If you own your mutual fund shares within your IRA or other qualified retirement account, then you will receive a Form 1099-R. This form provides you information about any retirement account rollovers, taxes withheld upon your behalf and any distributions made. You will only receive this form if the mutual fund is held within a retirement account, and ordinarily no taxes are owed from gains in your retirement account until the money is withdrawn.
