EquityStat and Taxes

It’s that dreaded time of year – tax time. EquityStat’s portfolio manager has several tools to help investors with their taxes.

If you sold any shares last year, you can use EquityStat to generate IRS Form 8949.  IRS Form 8949 is a form that shows your short-term  and long-term capital gains on any investment sale.  EquityStat will automatically calculate these capital gains.  It will then generate a PDF of Form 8949 with all needed information that the IRS requires.  You can then give this form to your tax preparer when you are preparing your taxes.  To generate IRS Form 8949, click the Tools menu and then choose the Generate Form 8949 menuitem.

IRS Form 8949

Another tool to help you with your taxes is the ability to export your investment’s transactions to a spreadsheet. To export your transactions, click the Tools menu and then choose the Export Transactions menuitem. When you export your transactions, you will get a spreadsheet showing each transaction for the investment including the type of transaction it is (e.g. Buy, Sell, Dividend, etc). With this information, your tax preparer can calculate your taxable capital-gains and taxable dividends for all of your investments.

2015 8949 IRS Tax Forms Released

We just released the 2015 8949 IRS tax forms. If you have sold any stocks or mutual funds in 2015, then you can generate IRS Form 8949 to calculate your gain or loss on a stock sale. EquityStat will automatically calculate your short-term gains and losses and long-term gains and losses and generate a PDF 8949 form. You can then save or print out this form and give it to your accountant or tax preparer. To generate Form 8949 click the Tools menu and then select the Generate Form 8949 menuitem.

Cost Basis

What is Cost Basis?

Investopedia defines cost basis as:

The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset’s cost basis and the current market value. Also known as “tax basis”.

Why is it important?

The IRS is requiring more and more reporting of your cost basis of your investment.  They also require your report the capital gains/losses of your investments. To calculate your capital gains you need to know your cost basis.

How do you calculate it?

On the surface calculating cost basis sounds easy. Just use the price you paid for your stock. For example, if you purchased a 100 shares of XYZ company for $120 then your cost basis is $120. However, things get complicated if you had 3 for 2 stock split. Also, what if you purchase an additional 50 shares for $90? What if you have a split, reinvest capital gains and purchases in a given year? What is your cost basis? Now things get really complicated.

How EquityStat makes things easier

With EquityStat all you have to do is enter your purchases, splits, capital gains and we will calculate your cost basis. Then when you sell your stock whether all of your shares or just some of your shares, we can easily calculate your gain or loss. You can then generate IRS Form 8949 that will show your cost for each investment you sold in the last year.

TurboTax and Investment Taxes

Do you use TurboTax to calculate your investment gains and losses?  Do you use TurboTax to generate form Schedule D or Form 8949?  If so be aware that TurboTax is now charging extra for these features.

In addition to paying $59.99 for the Deluxe version of Turbo tax, if you want to calculate your investment capital gains or losses from stock, mutual fund or ETF sales you will have to pay an additional $20 or $30.

You can read more about the changes to TurboTax here.

http://www.latimes.com/business/hiltzik/la-fi-mh-intuits-catastrophic-turbotax-20150118-column.html

If you are looking for an alternative to TurboTax for calculating your capital gains or losses, checkout EquityStat.  With EquityStat you can generate IRS Form 8949 .  Form 8949 is used to report your short and long term capital gains and loses.  Once you enter your purchases and sales of your investments into EquityStat, you can then generate Form 8949 and use this form to fill out your Schedule D Form.

 

Investments, Taxes, Form 8949, Schedule D

Selling Investments and the IRS

The IRS is requiring more reporting when you sell your investments.  Specifically, they require you to report the investment cost, cost basis in investment terminology, and the gain/loss from the investment sale.  If you purchase 100 shares of a stock and sell 100 shares of the stock, your cost basis is easy to calculate.  Things get more difficult when you purchase shares in different lots.  For example, you purchase 100 shares in 2011, 50 shares in 2012, 200 shares in 2013 and sell 160 shares in 2014.

Form 8949

What is your cost basis in the above scenario?  This is not an easy calculation to do.  To make things even more difficult, you have to report both your short term gains and long term gains to the IRS separately.  Fortunately, EquityStat makes this easy.  EquityStat calculates your cost basis for each investment and can also generate IRS Form 8949 which is a report that shows your gain/loss on each investment sold.  Your tax preparer can then use Form 8949 to create the IRS Schedule D form.

To Generate Form 8949, click the Tools menu at the top of the portfolio and then click the Generate IRS Form 8949. Choose your tax year and EquityStat will generate the report showing both your short term and long term gain/loss on each investment you sold during the tax year.

 

 

 

Why Mutual Fund Investors Need a Portfolio Manager

If you own mutual funds why do you need a portfolio manager?  Why can’t you just use the tools your mutual fund provides?

Transaction History

Many mutual funds do not provide all of your transaction history.  They may provide up to 3 years of history but if you have owned your mutual fund longer than this, you do not have access to every transaction you have made.

Why is transaction history important?  One, you need a complete transaction history for tax purposes if you sell shares in your mutual fund.  Whenever you sell shares in a mutual fund you need to report to the IRS you gain or loss from to the sale.  Without a complete transaction history you cannot accurately report the gain or loss, which may effect your taxes.

You also want a complete transaction history so that you can track your mutual fund’s performance over the history of the investment, not just over a limited time.

Performance Evaluation

Many mutual funds will provide you the yearly return of the mutual fund but this may not be the return your investment has made.  For example, say you own the hypothetical mutual fund XRXRXR.  Let’s say XRXRXR price on January 1 is $100 a share and on December 31 it is $110 a share.  The mutual fund will report their yearly gain as 10%.  However, this does not take into account when you bought your shares.  Let’s say that on July 1 you buy shares at $90 a share.  Based on a closing price of $110/share, your gain is 22% and not 10%.  Or, let’s say you bought your shares at $120 a share.  Based on a closing price of $110/share, your loss is 8% and not a 10% gain.  If you rely on your mutual fund’s performance return it could be less or more than what you are actually earning.

EquityStat

With EquityStat you can view the complete history of your transactions.  In addition EquityStat gives you the ability to generate IRS form 8949 which will calculate any gains or losses on the sale of your mutual fund shares.

EquityStat will also calculate the annualized return on all of your investments.  This calculation is based on when you purchased and sold your shares, not what the mutual fund reports their return is.