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Tax Reporting Reinvested Dividends
Old 03-21-2006, 09:30 PM   #1
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Tax Reporting Reinvested Dividends

I sold a stock last year that had dividends reinvested for several years. I have a document showing each purchase of new shares. It's a fairly long list of transactions. Do I need to report each individual transaction on the tax form as a separate line item or is there a way to aggregate them together so that only a couple entries are necessary? Perhaps one line item for short term gains and another for long term? If so what purchase dates would I use? The IRS is only interested in long vs short term, right?
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Re: Tax Reporting Reinvested Dividends
Old 03-21-2006, 10:18 PM   #2
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Re: Tax Reporting Reinvested Dividends

As I recall, schedule D does not ask for purchase date, only date of sale. If you sold only at one time, then you only need one entry on schedule D. You are supposed to separate short term and long term gains (according to the regs.) but the IRS has no way to know so why bother? For stocks that I sold multiple times during the year I have always just entered "various" in Turbotax for the date sold and shown the whole thing on one line.

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Re: Tax Reporting Reinvested Dividends
Old 03-21-2006, 10:53 PM   #3
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Re: Tax Reporting Reinvested Dividends

You should have received a 1099 form from your broker. The 1099 has all the information you need... dividends payed, and whether or not they were qualified.
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Re: Tax Reporting Reinvested Dividends
Old 03-21-2006, 11:33 PM   #4
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by grumpy
As I recall, schedule D does not ask for purchase date, only date of sale.
Take another look at Schedule D.
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Re: Tax Reporting Reinvested Dividends
Old 03-21-2006, 11:39 PM   #5
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by grumpy
You are supposed to separate short term and long term gains (according to the regs.) but the IRS has no way to know so why bother?
Maybe because there could be a difference between long-term and short-term tax rates.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 12:25 AM   #6
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Re: Tax Reporting Reinvested Dividends

Sorry, I goofed.

You can lump all the short terms together (less than 1 year) and all the long terms together. Then enter various for the dates.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 12:33 AM   #7
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Re: Tax Reporting Reinvested Dividends

You can separate as you suggest and have 1 line item for the long term and another for the short term Label purchase date as various (as JB suggests) and you can add a range of dates (e.g. 1/03-12/04). Keep the detail documentation in case IRS asks.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 08:30 AM   #8
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Re: Tax Reporting Reinvested Dividends

This is why I no longer reinvest dividends. In addition to separate LongTerm/ShortTerm, you can actually run into wash sales if you sell within 30 days of the most recent reinvest and your sale was at a price slightly lower than what you reinvested at.

IMO, that is way to much hassle for a few % dividends.

KISS principle - have the dividends paid in cash, spend or reinvest as a lump sum where and when you want. Put it in a fund/stock that you don't plan to sell for a year (or at least 30 days) and you'll simplify your life. Tax time is 'taxing' enough!

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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 08:52 AM   #9
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by ERD50
IMO, that is way to much hassle for a few % dividends.

KISS principle - have the dividends paid in cash, spend or reinvest as a lump sum where and when you want. Put it in a fund/stock that you don't plan to sell for a year (or at least 30 days) and you'll simplify your life. Tax time is 'taxing' enough!
Quicken or even an Excel spreadsheet greatly simplifies cost basis, assuming that an investor doesn't just use the "various" and one number for cost basis.

One advantage to reinvesting dividends from stocks or ETFs is that Fidelity (and others) will reinvest for zero commission. If the money isn't needed for expenses and if the asset allocation isn't out of whack, then reinvesting dividends for free can only improve the long-term returns. It also beats the heck outta most mutual fund ERs.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 09:19 AM   #10
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Re: Tax Reporting Reinvested Dividends

Another way is to stop reinvesting dividends before you plan to sell so that they are all long term gains. Also, if you are going to sell, sell all of your shares. If you keep good records (annual statements), it isnt too difficult to update in excel or whatever. Reinvested dividends are an important part of long-term return and worth the time unless you are going to sell often.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 10:38 AM   #11
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by retire@40
Take another look at Schedule D.
Retire@40,

Thanks. I stand corrected. I enter "various" into Turbotax for both dates.

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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 11:27 AM   #12
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Re: Tax Reporting Reinvested Dividends

You're going to have a great deal of fun if you're ever audited...
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 01:46 PM   #13
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Re: Tax Reporting Reinvested Dividends

I plan to do like Maddy said. I expect to retire in about 18 months and then I will stop having dividends reinvested. After a year there will be no short term gains to report. Then if I even need to sell a stock I will sell all the shares of any particular stock.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 02:54 PM   #14
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Re: Tax Reporting Reinvested Dividends

This is the greatest site ever! More help than IRS.

Thanks guys!

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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 04:37 PM   #15
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Re: Tax Reporting Reinvested Dividends

Those of you in pre-retirement consider this...

You're already being taxed on the dividends at a very pleasing rate capped at 15% (for stock funds anyhow)...why not take your dividends from your taxable funds and increase your 401k, IRA or Roth contributions to suit...?
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 04:38 PM   #16
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Re: Tax Reporting Reinvested Dividends

Vanguard is a good partner for help with this. *It's TurboTax feature will import all your acct data into Scheds B and D for you. *I think it did need for me to adjust the "Date Acquired" to show "Various", as discussed above.

That brings up a wee personal inquiry. *How many of you gurus do your own tax preparation?
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 04:41 PM   #17
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Re: Tax Reporting Reinvested Dividends

Me.

"various" is fine, as long as you have good data to backup the average cost basis and the date acquired. Vanguards actually done a poor job for me in filling in aquisition dates, but then again my accounts have been resized from regular to admiral and from individual to joint over the last few years.

Various and a wild guess at the cost basis is NOT a very good idea.
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Re: Tax Reporting Reinvested Dividends
Old 03-22-2006, 04:44 PM   #18
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by Starry Night
How many of you gurus do your own tax preparation?
http://early-retirement.org/forums/i...p?topic=5887.0

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Re: Tax Reporting Reinvested Dividends
Old 03-23-2006, 02:19 PM   #19
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Re: Tax Reporting Reinvested Dividends

My FIL had made a $1700 purchase of Lord Abbet Affiliated fund in 1955 and had dividends reinvested (all of this in a taxable account) and it gave me pause when he said he tossed all of his yearly statements. Thank goodness LA will pull those records (for $80) and thank God for MS Money to calculate a cost basis! My point, KEEP GOOD RECORDS.
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Re: Tax Reporting Reinvested Dividends
Old 03-23-2006, 02:40 PM   #20
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Re: Tax Reporting Reinvested Dividends

Quote:
Originally Posted by larry
My point, KEEP GOOD RECORDS.
Or, as he may be doing, let the heirs worry about it...
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