IRS publication 550 involves information for the taxpayers
on the use of investment income/expenses during filing of income tax returns.
One issue that dogs the individual when filing tax returns is about qualifying
dividends. The first question that arises is how to differentiate between
qualified and simple dividends. In addition, it is important to understand how
qualified dividends can help in reducing your taxes. Publication 550 explains
all this and more.
What is a Dividend?
It is the amount paid by corporations to stockholders. This
may be in the form of cash, stock, or property. These represent profits that
corporations earn over a period. The Internal Revenue Service considers it as
income and therefore levies taxes. Simple dividends work as ordinary income;
however, taxes on qualified dividends use positive capital gain rates. There
has to be a clear demarcation between simple and qualified dividends to avoid
confrontation with revenue services that can land taxpayers into unnecessary
problems.
IRS classification involving qualified dividends may lead to
lower tax liabilities. One needs to calculate total taxes to qualified
dividends and find reductions in the amounts owed. In general, mutual fund
dividends and stocks come under qualified bracket. However, a clear idea on the
same never hurts and a deep study of publication 550 provides the information.
Tax Extension Forms 2013
Tax Extension Forms 2013
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