Tips for Managing Your Investment Taxes

There are plenty of great things about being an investor, but filing tax returns isn’t one of them. There’s nothing glamorous about paying taxes, which is why there isn’t usually much discussion about how tax returns should or shouldn’t be filed. When you start to explore the world of investing, you’re thinking about rates of return and putting your hard-earned dollars into the industries that will get you the most bang for your buck. Maybe you’re interested in supporting industries that reflect your values, like sustainability, or you want to get in on the ground floor of an exciting startup. Either way, the folders and envelopes you’ll be using to file taxes with the IRS are pretty far down on the list of priorities.

Unfortunately, you should probably move them up the list — at least a little bit. The last thing you want is the IRS to come knocking on your door, demanding to see your income tax return, only to find your folders and envelopes in disarray and no record of your latest tax return to be found. Even the most creative solutions to messy record-keeping won’t be enough to impress an IRS auditor if push comes to shove. Just like any other aspect of investing, you need to be savvy and responsible about your tax payments. With that being said, let’s take a look at exactly what you need to keep an eye on.

Professionalism is key for taxpayers reporting on investments.

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Sure, you could e-file your tax return, but it would be a shame to discover that a computer-generated error caused your tax return to get misfiled, wouldn’t it? Filing taxes in tax return envelopes, by first class mail, and in a hard-copy format is the only way to make sure every form is properly signed. A double window envelope looks classy, too, and a little extra professionalism never hurt anyone. It’s probably a good idea to get tax return folders at the same time to make sure that you can have all your tax forms organized properly. Every financial institution you’re investing with will have to send you a document to use when filing your tax return, and smart taxpayers keep those neat and tidy in tax envelopes.

Make sure to list your investments in detail — every dividend matters.

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If you’re more than a casual investor, you probably have quite a lot to report, which is why you need to be very detailed in your reporting. For example, if you’re investing in a gold mining company like Alamos Gold on the NYSE or TSX (Alamos trades as AGI), you might receive various dividends from the company over the course of the year. Taxpayers who invest in Alamos will be receiving the fruits of the gold miner’s investment in the Mulatos Mine in Sonora, Mexico, as well as in the Young-Davidson Mine in Northern Ontario and the Kirazli project in the Republic of Turkey. Every ounce of gold pulled out of the ground at Young-Davidson translates into returns for investors. In the third quarter, they may make more than they did in the second quarter, and it’s up to those investors to keep track of all of those earnings (which is why a tax folder comes in handy) so that they can be properly reported to the IRS. It’s no use to make a bunch of money off of a sound investment like Alamos if you end up paying fines to the IRS because you didn’t file a detailed tax return.

Paying taxes on investments doesn’t have to be hard. If you’re one of many taxpayers who will be reporting on earnings from investments, just make sure to be detailed and meticulous about everything you send in.

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