Lux Investing
When it comes to taxes, what is some good basic advice for getting started in mutual fund investing?
I'm only interested in long term investing and don't plan on doing anything except contributing to the fund for many, many years. To be honest, taxes on the things scare the death out of me and I don't really want to get an accountant if I don't have to. Any answers directed toward the areas below would be most helpful to my needs. ***** What information should I keep track of as I invest if I want to make sure I know everything I need to? Are taxes excruciatingly difficult for mutual funds that have been owned for a long time and are finally sold? Is turbo tax essential software for someone who invests in mutual funds? If I invest money often but never sell shares, how much more difficult are taxes for me then for someone who has made no such investments. Could you give me an example step by step process for filing taxes on a fund which has never been sold? E.g. What forms are involved, how do the forms interact with each other, etc. ***** Sorry this is such a long question. I've read a lot about the actual concept of mutual funds, but nothing breaks everything down for a total beginner when it comes to taxes.
Public Comments
- If you indicate the country you live in, you are most likely to get responses which make sense. The taxation laws vary considerably from one country to another. With regards to your questions about taxes - do you mean personal taxes on dividend income? If so your government taxation office should have a website where this information is available. In Australia this is http://www.ato.gov.au/ and in the USA it is http://www.irs.gov/ If you invest money in shares and do not sell them, then the only time you will have a tax liability is when you receive a dividend. Normally all you do is show this dividend income in your tax return. You will then be taxed on that additional income at the rate of tax applicable to you at that level of income. This should not be very difficult to do no matter which country you live in. In Australia, some companies pay a dividend which is occasionally a ' franked ' dividend. This means that the company has paid the dividend out of taxed income. The shareholder receiving a franked dividend is entitled to a refund of the tax paid by the company on the dividend. If a share holder received a dividend of say 70 cents fully franked in Australia they would show as dividend income $1.00 in their tax return and 30 cents would be shown as tax already paid on that $1.00. These types of dividends in Australia have substantial tax benefits for Australian residents but are not available to non-residents. Hope this is of some help.
