IRS for Investors: Tax Rules, Forms, and Publications

Direct Answer

The IRS administers federal tax law for investors. The key investor-facing areas are capital gains (Publication 550 covers investment income and expenses), retirement accounts (Publications 590-A and 590-B cover IRA contributions and distributions; Publication 560 covers self-employed retirement plans), cost basis and wash-sale rules (Publication 550 and Form 8949), and required minimum distributions (Publication 590-B). Always verify current rules at irs.gov because contribution limits, tax rates, and RMD rules change annually.

Capital gains and investment income

The IRS distinguishes between short-term and long-term capital gains based on how long a taxpayer held an asset before selling. Assets held for one year or less produce short-term capital gains, which are taxed at ordinary income tax rates. Assets held for more than one year produce long-term capital gains, which qualify for preferential rates of 0%, 15%, or 20% depending on the taxpayer's taxable income and filing status. The IRS updates the income thresholds for each rate annually.

Qualified dividends receive the same preferential tax rates as long-term capital gains. To qualify, dividends must be paid by a U.S. corporation or a qualifying foreign corporation, and the taxpayer must have held the underlying stock for a minimum holding period. Ordinary dividends that do not meet the holding period or issuer requirements are taxed at ordinary income rates.

Higher-income investors may also owe the net investment income tax (NIIT), a 3.8% surtax that applies to the lesser of net investment income or the amount by which modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married filing jointly. Net investment income includes interest, dividends, capital gains, rental and royalty income, and certain passive income. It excludes wages, Social Security benefits, and most distributions from qualified retirement accounts.

IRS Publication 550 (Investment Income and Expenses) is the primary reference for investors on capital gains, qualified dividends, mutual fund distributions, options, and wash-sale rules. It is updated annually and available at irs.gov.

Retirement account tax rules

The IRS administers the tax rules governing contributions, investment growth, and distributions for retirement accounts. The main account types investors encounter are traditional IRAs, Roth IRAs, 401(k) and 403(b) employer plans, SEP-IRAs, and SIMPLE IRAs. Each has its own contribution limits, eligibility rules, and distribution rules, and those rules change frequently with cost-of-living adjustments and legislative changes.

Traditional IRAs allow deductible contributions for taxpayers who meet income and workplace plan eligibility criteria. Contributions grow tax-deferred and distributions are taxed as ordinary income. Roth IRAs accept after-tax contributions; qualified distributions (after age 59 1/2 and a five-year holding period) are entirely tax-free. The deductibility of traditional IRA contributions phases out for taxpayers covered by a workplace plan above certain income thresholds, which the IRS adjusts annually.

SEP-IRAs and SIMPLE IRAs are designed for self-employed individuals and small business owners. SEP-IRA contribution limits are calculated as a percentage of net self-employment income up to an annual cap set by the IRS. SIMPLE IRAs have both employee elective deferral limits and employer matching contribution requirements.

IRS Publication 590-A covers IRA contributions. Publication 590-B covers IRA distributions, including required minimum distributions. Publication 560 covers retirement plans for small businesses and self-employed individuals. The current contribution limits for all plan types are updated annually at irs.gov/retirement-plans.

Required minimum distributions (RMDs)

Required minimum distributions are mandatory annual withdrawals that the IRS requires from certain tax-advantaged retirement accounts once the account holder reaches a specified age. Accounts subject to RMDs include traditional IRAs, SEP-IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and most other employer-sponsored plans. Roth IRAs are not subject to RMDs during the original owner's lifetime, though inherited Roth IRAs have their own distribution rules.

The SECURE 2.0 Act changed the RMD starting age from 72 to 73 for individuals who reach age 72 after December 31, 2022, and to 75 for individuals who reach age 74 after December 31, 2032. Because these rules changed legislatively, always confirm the current starting age at irs.gov or from a tax professional rather than relying on guidance written before those changes took effect.

The annual RMD amount is calculated by dividing the prior December 31 account balance by a life expectancy factor from the IRS Uniform Lifetime Table (or the Joint Life and Last Survivor Expectancy Table if the sole beneficiary is a spouse more than 10 years younger). The IRS provides these tables in Publication 590-B. Failing to take the full RMD triggers an excise tax of 25% of the amount not distributed (reduced from 50% by SECURE 2.0), which can be reduced to 10% if corrected within two years.

Inherited IRAs have different and complex distribution rules that depend on the relationship between the beneficiary and the original owner, the owner's age at death, and whether the owner had already begun taking RMDs. Publication 590-B covers inherited IRA rules.

Cost basis and wash-sale rules

Cost basis is the original value of an asset for tax purposes, typically the purchase price plus commissions and fees. When a taxpayer sells an asset, the gain or loss is calculated as the difference between the net proceeds and the adjusted cost basis. Different acquisition methods produce different cost basis figures: shares acquired through stock compensation plans, inherited shares, gifted shares, and shares acquired through dividend reinvestment plans each have rules for establishing basis.

Investors who hold multiple lots of the same security can typically choose which lots to sell when disposing of shares, subject to IRS rules. Common methods include first-in first-out (FIFO), specific identification (allowing selection of particular lots), and average cost (available for mutual fund shares). The chosen method affects both the amount of gain or loss recognized and whether that gain or loss is short-term or long-term.

The wash-sale rule (Internal Revenue Code Section 1091) disallows a capital loss if the taxpayer sells a security at a loss and acquires a substantially identical security within 30 days before or after the sale. The 61-day window runs from 30 days before the sale through 30 days after it. The disallowed loss is not permanently forfeited; it is added to the cost basis of the replacement security, which defers the loss to a future sale when the replacement security is itself sold without triggering another wash sale.

Form 8949 (Sales and Other Dispositions of Capital Assets) is used to report individual capital gains and losses. Schedule D summarizes the Form 8949 totals and flows to the main tax return. Brokers report transaction proceeds and, in most cases, adjusted cost basis on Form 1099-B, which is sent to both the taxpayer and the IRS. Publication 550 covers cost basis rules and the wash-sale rule in detail.

Key IRS investor forms

Investors receive and file a set of IRS forms that document investment income and transactions each year. Understanding what each form covers helps investors verify that all income has been reported and that any errors on broker-issued forms are caught before filing.

• Form 1099-DIV reports dividends and distributions paid by domestic corporations and certain foreign corporations. It distinguishes qualified dividends (taxed at capital gain rates) from ordinary dividends and shows return-of-capital distributions, which reduce cost basis rather than creating taxable income.
• Form 1099-INT reports interest income from bank accounts, bonds, Treasury securities, and other interest-bearing instruments. Tax-exempt interest from municipal bonds is also reported here, even though it is not subject to federal income tax.
• Form 1099-B reports proceeds from broker transactions, including securities sales. Since 2011, brokers have been required to report adjusted cost basis for covered securities. The form identifies whether each transaction is short-term or long-term and whether the basis was reported to the IRS.
• Form 1099-R reports distributions from retirement accounts and pensions. It identifies the taxable amount of the distribution, whether the distribution qualifies as a rollover, and whether the distribution may be subject to a 10% early withdrawal penalty.
• Form 5498 reports IRA contributions, rollovers, and year-end account values. It is issued by the IRA trustee and sent to both the account holder and the IRS. Because it can be issued after the tax filing deadline (for contributions made through April 15), it documents contributions for the prior year.
• Form 8949 is filed by the taxpayer to report individual capital asset sales. Each sale, whether reported on a 1099-B or not, requires a line on Form 8949 unless a specific exception applies. The form then feeds into Schedule D.
• Schedule D summarizes capital gains and losses from Form 8949 and other sources, calculates the net capital gain or loss, and applies any capital loss carryovers from prior years. Up to $3,000 of net capital losses can be deducted against ordinary income each year; excess losses carry forward indefinitely.

FAQ

Educational use

This page is educational and informational. It does not constitute tax advice and does not account for an individual's specific situation, filing status, state tax obligations, or financial circumstances. Tax rules change frequently with legislative and regulatory action. Verify current IRS rules, limits, and publication content directly at irs.gov before making tax-related decisions, and consult a qualified tax professional for advice specific to your situation.

References

• IRS: Internal Revenue Service
• IRS: Retirement Plans
• IRS: Forms and Instructions
• IRS Publication 550: Investment Income and Expenses

Reviewed by the Swoopr Editorial Team in September 2026.