When people fail to report their returns with an accurate description, the Internal Revenue Service (IRS) estimates that nearly $345 billion dollars per a year is lost due to incorrect information. If you want to be a smart taxpayer then you need to educate yourself on how to file your capital gains and losses correctly. This article's aim is to help provide the basic information that a person will need in order to report their capital gains and losses and avoid future trouble with the IRS.
Nearly everything a person may own can be used and counted as a capital asset and thus be seen as a capital gain. Some common personal and business items that could be counted as a capital gain includes: the home of primary residence, the household furnishings, business property, gold, silver or other precious metals and stones, stocks, and bonds.
Now before you can file your taxes correctly, you need to be able to tell the difference between the capital asset/gain you have versus your basis. A capital gain is something that is sold for more than its value of basis. However, if you sell something less than its value of basis, then that is considered as a capital loss. When filling out your tax returns, you must report all your capital gains and losses. However, only capital losses on investments and business properties can be used as deductions. If you received losses from personal properties, you will not be able to use them as deductions.
All capital gains and losses must be reported on your Tax Return Form 1040, Schedule D. After that information is accurately calculated, then that information is transferred to line 13 of the US Individual Income Tax Return Form 1040. You can also classify your capital gains and losses as a short-term or long-term holding. To be considered a short-term capital gain, it must be in your ownership for less than a year. For it to be considered a long-term capital gain, it must be held for longer than a year.
While no one likes to pay taxes, it's a fact of life. The smart and wise taxpayer will always be on top of their yearly taxes. While it may distress you to have to pay the Internal Revenue Service every year, if you don't do it - you can end up losing more than you could have possibly ever saved.