What is Publication 550 from the IRS?
The Internal Revenue Service (IRS) puts out a document called IRS Publication 550 that tells people how to report investment income and costs when they file their taxes. In Publication 550, the IRS shows which investment costs can be deducted, how to report gains and losses from the sale of investment property, and which types of investments are taxed.
How to Understand Publication 550 of the IRS
When investors buy land in the U.S. from a foreign person or business, they may have to withhold income taxes. Also, U.S. citizens with property in other countries must report any income they get, even if they didn’t get a Form 1099. IRS Publication 515 goes into more depth about this. When workers exercise their stock options, they are subject to different tax rules. Publication 525 from the IRS has more details.
What’s in Publication 550 from the IRS?
One of the agency’s most complicated topics is handling the tax consequences of financial gains and losses. The IRS says it has information on taxing investment income and costs for people who own shares in mutual funds or other regulated investment companies, like money market funds.
It also lists the types of taxed investment income and the types of investment costs that can be written off. On your tax return, it tells you when and how to list these things. There is information on figuring out and reporting gains and losses when you sell investment property. Property trades and tax shelters are covered in another critical part.
A helpful table in the book shows where to report different types of investment income for each type of return. This used to include forms 1040, 1040A, and 1040EZ, but those last two are no longer available.
This article goes into great detail about interest income from money market funds, CDs, gifts for opening accounts, insurance premiums paid in advance, interest on tax refunds, interest on installment sale proceeds, interest on insurance contracts, how to handle usurious interest, interest on frozen deposits, below-market loans, foreign interest, U.S. Savings Bonds, educational savings bonds, and bonds sold b
payments are treated, including ordinary payments, which are the most common way for a company or mutual fund to give money to its shareholders. If you get qualified dividends, you can get the same 0%, 15%, or 20% tax rate on them as you can on net capital gain. It goes into great depth about capital gain distributions, which mutual funds and real estate investment trusts (REITs) send you or credit to your account.
