First time investor. What will I pay taxes on next year?

Forum|Forum|6 years ago
June 22, 2020
14 replies
35 views

I'm going to be investing some money with Merrill Lynch and its my first time investing that is not a 403(b). I can't put this money into an IRA or the 403(b) because I may need it in 5 years. I'm using their Guided strategy where I tell them my risk tolerance and they invest the money in various securities for me (cash, fixed income, and equities.)

So since this is not tax-advantaged, what will I actually have to pay taxes on at the end of the year?

Capital appreciation? (I think not.)

Dividends that are reinvested in the funds?

Capital gains if the fund sells one stock and buys another?

Anything else?

And I assume the brokerage will keep track of my basis for me?

Would I get a 1099-DIV and a 1099-INT if the stocks pay dividends or the cash is invested in a money market, or is everything rolled into one 1099-B?

Critter

Level 15

Would I get a 1099-DIV and a 1099-INT if the stocks pay dividends or the cash is invested ? YES you will ... and no matter what you do with the earnings it will be taxable on the return.

Capital gains if the fund sells one stock and buys another? YES you will ... same as the int/div you will report all sales from the 1099-B on the tax return no matter what you did with the proceeds.

And I assume the brokerage will keep track of my basis for me? Yes they will however keeping your own records is a wise move.

Please ask your broker to explain any other items you don't understand.

AmeliesUncle

Level 15

@Opus 17 wrote:
Capital appreciation? (I think not.)

No. You are correct.

Dividends that are reinvested in the funds?

Yes. Taxable regardless if they are reinvested or not.

Capital gains if the fund sells one stock and buys another?

Yes. Taxable regardless if other stocks are bought or not.

Anything else?

Can't think of anything.

And I assume the brokerage will keep track of my basis for me?

Yes, but I think you sometimes have options. If you buy the same stock at different times and you sell only part of those stock, I think you have the options on how to report it (first-in-first-out versus average purchase price). But it easiest just to report what the 1099-B shows.

Would I get a 1099-DIV and a 1099-INT if the stocks pay dividends or the cash is invested in a money market, or is everything rolled into one 1099-B?

Yes. 🙂 They generally send out a "Consolidated Statement" that has the 1099-DIV, 1099-INT and 1099-B on the same document.

Rick19744

Level 13

Something tells me that @Opus 17 did not really ask this question?

Something must be going on.....too strange.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Opus 17

Author

Level 15

Why not? Everyone has a first time for something. I‘be never invested outside of my retirement plans before, and I have some money that, for various reasons, is better off outside my retirement accounts, and I want to earn more that 1% in an online savings account. It’s a different experience for me to have all gains and dividends reinvested and still owe taxes on money I never touch. I wanted to make sure what to expect, even though I had a fair idea to start with.