Mike DiSabatino CPA
Are You Paying too Much?
All too often when you sell an investment there are errors made in recording the taxable gain or loss on the transaction. Here are some ideas to ensure your tax bite is accurate.
Keep good cost documentation. Brokerage firms are now required to keep track of the cost of your purchases and report them to you and the IRS when you sell. Unfortunately, they are not always accurate. The only way to ensure accuracy is to keep personal records of how much an investment cost. Then you can double-check the accuracy of any Form 1099 received.
Pay attention to older transactions. Investments you have owned for years may not have cost information available through your broker. Try to pull together the cost information for these older transactions now and update your portfolio accordingly. That way you will not be faced with a tax surprise when you sell your investment.
Understand the dividends dilemma. If you regularly reinvest dividends pay more attention to the total cost of your investment when you sell. Remember, the investment cost of the reinvested dividends is different each time you purchase the stock or mutual fund. Many taxpayers forget to account for this when they sell and end up paying extra tax.
Pay attention to annual capital gains. Many mutual funds also send a 1099 B statement for your share of capital gains collected by the mutual fund each year. These gains increase your cost basis even though your number of shares does not increase. The unwary investor who does not account for this will run the risk of understating the investment’s true cost.
Do not forget the fees. Please remember that your investment cost also includes any transaction fees related to the security. These fees apply when you buy and sell your investment.
By paying special attention to stock and mutual fund transactions you can ensure the tax paid reflects the true gain or loss on your investment.
Please give us a call to discuss this or any of our other topics with you, so we can address your specific requirements.
DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com
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