Tax forms you may receive

Many investment tax forms sound pretty similar. Make sure you know which ones you need and what to do with them.

Points to know

• 1099 forms report income (including investment income) to you and the IRS.
• Other forms are less common, but you may receive them for certain transactions or types of investments.

1099 forms

In general, 1099 forms report income other than wages. There are several types of 1099 forms.

As an investor, you might receive these forms:

• 1099-B, which reports capital gains and losses.
• 1099-DIV, which reports dividend income and capital gains distributions.
• 1099-INT, which reports interest income.
• 1099-R, which reports distributions from retirement accounts.

Other types of 1099 forms are less common, but you might receive them if you invest in certain types of securities or accounts, or if you perform certain transactions. These include:

• 1099-MISC, which reports substitute payments in lieu of dividends.
• 1099-OID, which reports any original issue discount (OID) from debt obligations, including Treasury Inflation-Protected Securities (TIPS).
• 1099-Q, which reports distributions, including transfers to another financial institution, from education savings accounts (ESAs) and 529 accounts.

Capital gains

An increase in the value of an investment over the initial purchase price. A capital gain is "unrealized" until the investment is sold, when it becomes a realized gain. Realized gains are taxable and they may be considered short-term (if the investment was owned one year or less) or long-term (if the investment was owned for more than one year).

Dividend

The distribution of the interest or income produced by a fund's holdings to its shareholders, or a payment of cash or stock from a company's earnings to each stockholder.

Interest

Income you can receive by investing in bonds or cash investments. The investment's interest rate is specified when it's issued.

529 savings plan

A type of investment account that offers federal and state tax benefits to people saving for higher education. These plans are sponsored by particular states but are usually open to anyone. The money in a 529 savings plan can be used for tuition and other qualified higher education expenses at thousands of colleges, universities, graduate schools, and trade and technical schools in the United States and abroad. You can also use your 529 assets for K–12 tuition of up to $10,000 per student per year for enrollment or attendance at a public, private, or religious school.