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Start with the tax year, accounts, and decisions you need help with
Before the meeting, identify the tax year and the specific decisions or transactions you want reviewed. Include completed sales and exchanges, distributions you received, shares bought through reinvestment, and any fund strategy you are considering. If you hold investments in more than one account, list each account and its tax status. The federal rules discussed here are not a substitute for checking state, local, or foreign rules that may apply to you.
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A useful opening question is: “Can you review these particular funds and transactions, and tell me what information you still need to determine their tax treatment?” That frames the conversation around your facts. The Internal Revenue Service (IRS) provides general rules, but it cannot decide from a fund name alone how a particular sale, distribution, or account should be reported on your return.
Ask how each sale or exchange will be reported
A sale or exchange of an investment generally requires comparing what you realized with your adjusted basis. The IRS states in Topic No. 409, “Capital gains and losses”: “When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss.” Ask your professional to identify the proceeds, basis, and any adjustments used for each transaction rather than relying on an unexplained net figure.
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Questions about proceeds, basis, and tax forms
- How was adjusted basis determined for each lot I sold or exchanged?
- Do my transactions need to be reported on Form 8949 and Schedule D, and are there exceptions or special reporting details for this tax year?
- Does the broker’s Form 1099-B information agree with my trade confirmations and other records?
- Were any shares transferred between brokers, inherited, or identified as noncovered, and does that change what I need to substantiate?
- Are there transactions where the reported proceeds or basis need an adjustment or explanation on my return?
For securities, IRS guidance says sales generally are reported on Form 8949 and Schedule D as appropriate. The exact forms and reporting depend on the transactions and the instructions applicable to the tax year. A broker’s statement is important evidence, but it may not contain every detail needed to establish basis, especially for older or noncovered securities or shares moved from another institution.
Ask about the holding period for each lot
Holding period determines whether a capital gain or loss is generally short-term or long-term. Under the general federal rule described by the IRS, an asset held for more than one year before disposition produces a long-term gain or loss; a shorter holding period is short-term. Ask the preparer to check the acquisition date of the exact shares sold. Do not assume every share in one ETF position has the same holding period: purchases made at different times can create separate lots, including purchases made when distributions were reinvested.
Ask: “Which lots were sold, what were their acquisition dates, and how did you determine each lot’s holding period?” If the records do not show which shares were sold, ask what lot-identification information is available and whether the reporting reflects it. Transaction-specific rules can affect the general treatment, so the preparer should confirm the rules for your circumstances and the relevant year.
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Ask what character each fund distribution has
A fund distribution is not automatically one kind of income for tax purposes. IRS Topic No. 404 identifies regulated investment companies, including mutual funds and exchange-traded funds, as entities that can pay dividends. The fund’s tax reporting—often reflected on Form 1099-DIV—helps distinguish the categories. Ask your professional to reconcile the form to the distributions and holdings you actually had during the year.
Questions to ask about Form 1099-DIV
- Which amounts are ordinary dividends, and which are qualified dividends according to the tax form?
- Did the fund report capital-gain distributions, and how are those treated on my return?
- Did I receive a nondividend distribution or return of capital that affects basis?
- Are the amounts on the tax form consistent with my year-end statements and distribution history?
- Do I need a corrected form or additional fund information before the return is finalized?
IRS guidance says capital-gain distributions from regulated investment companies are reported as long-term capital gains. A return-of-capital distribution generally reduces the adjusted basis of the investment; once basis reaches zero, additional nondividend distributions are generally taxable as capital gain. Ask your preparer to explain where these amounts are reflected in your return and records. Check the fund’s tax reporting and the forms applicable to the tax year rather than relying on a general description of the fund’s investments.
Ask how reinvestment affects lots and basis records
When a fund distribution is reinvested, the transaction can add shares to your position. Those shares need their own acquisition and basis records. A reinvestment does not make the recordkeeping question disappear merely because no cash was withdrawn. Ask your professional whether your history shows each reinvestment, its date, the number of shares acquired, and the basis associated with those shares.
Useful questions include:
- Did every reinvested distribution create a new tax lot in the records you reviewed?
- Can you identify the acquisition date and basis for the reinvested shares later sold?
- Are any reinvestment records missing, and what source documents would help reconstruct them?
- Does the broker’s basis reporting cover all the shares, or do older or transferred shares require additional records?
The IRS says taxpayers must maintain records identifying the basis of capital assets. For covered securities, broker Form 1099-B generally provides acquisition date, holding period, basis, and specified wash-sale information. Older or noncovered securities may require the taxpayer to determine basis from records; IRS guidance also notes that dividend-reinvestment records may need reconstruction. If you moved assets between firms, tell the preparer when and how the transfer occurred and provide records from the prior institution if available.
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Wash-sale rules can matter when an investor sells securities at a loss and there are related purchases or reinvestments. Do not assume that a broker has identified every potentially relevant transaction, particularly when activity took place in more than one account. Give your preparer the actual securities involved, transaction dates, account details, and any automatic reinvestment activity; ask them to decide whether the rules apply to your facts.
Ask directly:
- Did any loss sale have a related purchase or reinvestment that needs review?
- Should you examine transactions in my other accounts or accounts held elsewhere?
- Does Form 1099-B report a disallowed loss or basis adjustment, and does that information agree with my records?
- What supporting records should I retain for the treatment reported on the return?
IRS Form 1099-B instructions discuss reporting disallowed losses in specified circumstances and increasing the basis of acquired securities by the disallowed amount reported. The facts and reporting can be transaction-specific. Bring the complete activity rather than asking the preparer to infer the answer from a year-end summary or from one account alone.
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Compare actual fund strategies, not labels
There is no universal federal tax answer to “ETF versus mutual fund” or to another broad fund-strategy question. Ask for a comparison of the actual holdings, accounts, expected distributions, planned transactions, and likely holding periods. The IRS tax rules establish relevant concepts, but they do not determine which strategy is preferable for your goals or circumstances.
| Comparison point | Question for your tax professional | Why it matters |
|---|---|---|
| Account type and tax status | How does the account holding each fund affect the tax consequences I should consider? | The tax status of the account is part of the comparison; a fund name alone does not describe the full tax context. |
| Distributions | What distribution character and timing should I evaluate for each actual fund? | Ordinary or qualified dividends, capital-gain distributions, and return of capital can have different reporting and basis consequences. |
| Expected transactions and holding periods | What sales, exchanges, or purchases do I anticipate, and how might the lots and holding periods differ? | Disposition generally involves proceeds and adjusted basis, while the holding period affects short-term or long-term classification. |
| Potential wash-sale interactions | Could planned loss sales interact with purchases or reinvestments in any of my accounts? | Related activity may require review and can affect loss reporting and basis. |
| Basis and recordkeeping | Which option will be easier to document accurately given my transaction and reinvestment records? | Investors must maintain basis records, and missing or transferred-share history may require additional work. |
To make the comparison concrete, bring the names of the funds and accounts you are considering, along with expected activity and your intended holding period. Ask the professional to distinguish a tax observation from an investment recommendation: tax treatment is only one input, and the IRS sources do not establish a generally best fund type.
Bring records that let the preparer verify the transactions
Gather records before the appointment so the professional can trace reported amounts to the underlying activity. The precise set depends on what you owned and what happened during the tax year. Useful documents include:
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- Forms 1099-B and 1099-DIV, including corrected versions if issued.
- Year-end broker statements, trade confirmations, and transaction exports.
- Acquisition records for shares bought outside the current broker, plus transfer details.
- Dividend and capital-gain distribution histories, including reinvestment activity.
- Prior-year basis records and return information relevant to any continuing holdings or adjustments.
- Notes or statements showing related purchases in other accounts during periods when you sold investments at a loss.
If records are incomplete, identify what is missing instead of treating an estimate as confirmed basis. Ask which documents can support reconstruction and which parts of the return may depend on information that is not available. A simple investment tax log or organizer can help keep dates, account names, transaction confirmations, and reinvestment records together; it supports recordkeeping but does not calculate tax or replace broker statements and tax forms.
Close by clarifying scope and next steps
Before the meeting ends, ask the preparer to list any unresolved basis questions, missing forms, or transactions needing follow-up. Confirm which tax year’s instructions they are applying, what additional records they need, and whether their review includes every relevant account you disclosed. If you live or hold accounts in places with state, local, or foreign tax rules, ask whether those rules require separate advice or a separate return analysis.
For current federal guidance, consult the IRS publications and topic pages relevant to your facts, including Publication 550 and Topics No. 404, 409, 429, and 703, along with the Form 1099-B instructions for the applicable year. The 2026 Form 1099-B instructions are not automatically the right instructions for a different tax year; use the revision applicable to the return being prepared.
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