Don’t overlook reinvested dividends

One of the most common mistakes investors make is forgetting to increase their basis in mutual funds to reflect reinvested dividends. Many mutual fund investors automatically reinvest dividends in additional shares of the fund. These reinvestments increase tax basis in the fund, which reduces capital gain (or increases capital loss) when the shares are sold.

If you neglect to include reinvested dividends in your basis, you’ll end up paying tax twice: first on the dividends when they’re reported to you on Form 1099-DIV, and again when you sell the shares and the reinvested dividends are included in the proceeds.

To help ensure you’re properly accounting for dividend reinvestments when you’re filing your 2013 tax return — or for other tax-smart strategies for your investments — contact us today.

Lauren A. Carnes, CPA, MST

About Lauren A. Carnes, CPA, MST

Lauren joined the firm in 1988 and became a principal in 1997. Lauren has extensive experience with corporate and individual tax planning, financial planning and in representation with government agencies. She currently directs our tax department overseeing services in most areas including corporate and individual taxation.



Lauren A. Carnes, CPA, MST
Author: Lauren A. Carnes, CPA, MST
Lauren joined the firm in 1988 and became a principal in 1997. Lauren has extensive experience with corporate and individual tax planning, financial planning and in representation with government agencies. She currently directs our tax department overseeing services in most areas including corporate and individual taxation.