Tax implications?

Question

I would like to invest some sum of my money in the stock market. I am a student I dont work. If I sell the stocks and make some profit, how do I pay for taxes? Do I need to report it to the IRS? Can you explain me concisely?

Answer 1

Dont buy individual stocks. Buy good growth stock mutual funds with 10+ years of track record.

Answer 2

The broker will issue a 1099 to the IRS that shows how much money you received from your sales. That form doesn't show how much your original cost was for those sales. When the IRS gets your return, they try to match the sales amounts to the Schedule D on your tax return. If they can't find a match, they assume you didn't show the sale on your return and they will send you a letter showing tax due on the full amount of that sale. Because of the way they match, you want to carefully fill our your Schedule D with your cost and the proceeds for each individual sale, and then show  the taxable gain or loss as the difference between the two figures. Because of the matching procedure, you need to itemize each sale on Schedule D so they can identify everything from the 1099 the broker provided.

Your broker won't withhold on these sales, so you will pay the tax with your tax return. If you are doing well, you may need to compute and pay estimated taxes during the year in order to avoid getting hit with an underpayment penalty.

Answer 3

When you sell stock at a gain (you sell for more than you paid) you pay taxes on that gain.  You report that gain on a Schedule D (generally) which is attached to your 1040 form.

Answer 4

You will have to report it to the IRS because when the 1099 is issued to IRS it is only reported you will have to report it if it is a loss or gain on your tax return.  IRS has no way of knowing if it was a loss.  Hope you understand what i mean I know what i trying to say but can put it in writing.

Good luck in your investment.