- 1). Start with Form 1099-B. Anytime you sell a mutual fund, you will receive a 1099-B at year's end outlining the sales proceeds for each transaction. Your first step is to match the proceeds from any sales with the respective purchase price. If you do not have your original purchase price in your records, contact your financial services firm; these amounts are quite often found on account statements, but if not, your financial representative should be able to help you determine your cost. Use Schedule D to help you compute your gain or loss from each of your sales. Any mutual fund held one year or less should be categorized as a short-term position, while those held more than a year are considered long-term. Once you have computer your total gain or loss, transfer this amount to line 13 of your Form 1040.
- 2). Look at your 1099-DIV. If you received a short-term capital gain distribution from your mutual fund, it will appear in box 1a of Form 1099-DIV. As a short-term capital gain distribution is taxed similarly to an ordinary dividend, it appears as such on your 1099. Transfer any amounts in box 1a to line 9a of your Form 1040.
- 3). Check for carryover losses. An important part of tax planning is offsetting capital gains with capital losses. If you have taken losses in previous years that you have not yet offset, you are allowed to carry these losses over into future years. If your computations for the current tax year show a net capital gain, make sure to use any carryover losses to help offset the current year tax gains. Enter short-term loss carryovers on line 6 of Part 1 of Schedule D, and use line 14 of Part 2 of Schedule D for long-term capital loss carryovers.
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