Introduction to Reporting Investment Income on Your Federal Tax Returns

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To help you share your wealth with the IRS, this tutorial will cover what is taxable and what forms to report your income on.

What you will learn

  • What Investment Income Is Taxed?
  • Investment Information Tax Forms
  • IRS Tax Forms Used to Report Your Income
  • What Are IRS Tax Schedules?
  • Useful IRS Publications

What do you know?

Introduction to Reporting Investment Income on Your Federal Tax Returns

Whether you fill out your own income tax forms or have a professional do it, it is good to know what the Internal Revenue Service (IRS) requires of you. All income, whether it is earned at work, as interest or dividends on savings and investments, or capital gains from the sale of property, is subject to federal and state income tax reporting. Whether you actually have to pay tax on income depends upon a number factors that are determined when you complete an income tax return.

The IRS makes all required forms available to you without cost. You will probably receive a packet of tax forms and instruction in the US mail unless you expressly requested that they not be sent because you use a paid preparer who provides forms. You ought to familiarize yourself with the various forms that you will receive from brokers, banks, and other financial institutions relating to your investments. Ignorance of these forms is not an excuse for failing to properly disclose income and pay your taxes.

Sometimes forms you receive from financial institutions contain errors that might lead to your over- or underreporting income and paying the wrong amount of tax. Familiarity with these forms helps avoid these problems, which can lead to overpayment of taxes or penalties for underpayment.

Whether you use the services of a tax professional or not, the ultimate responsibility for accurately reporting income and paying taxes falls on your shoulders.