Tax Filing Season Begins: What Investors Need to Know
Tax filing season is officially underway, and for investors—especially those with income-generating assets—it’s time to start preparing. The Internal Revenue Service (IRS) started accepting personal income tax returns for 2025 on Monday, with the submission deadline set for April 15. If needed, this can be extended to October. It’s important to remember that any outstanding taxes must also be paid by April 15. The IRS anticipates around 164 million individual income tax returns will be submitted this season.
Rushing to file your tax return can be tempting, particularly if you expect a refund. However, it might be wise to take your time. Additional tax documents, which are crucial for completing returns, sometimes won’t be available until later in the spring. “My advice is not to rush into filing,” suggests Katherine Varega, a certified financial planner with Green Bee Advisory in Burlington, Massachusetts. “Make sure you have all the documentation before you file.”
Understanding Capital Gains and Income Taxes
If you sold assets when the S&P 500 climbed by 16% in 2025, you might face capital gains tax implications. Holding the asset for over a year means your earnings are classified as long-term, which are taxed at rates of 0%, 15%, or 20%. On the other hand, selling after less than a year subjects the gains to ordinary income tax rates, which can go as high as 37%. Interestingly, even if you don’t sell, you might still incur taxes; investors with dividend-paying stocks or exchange-traded funds in taxable accounts will owe taxes on that income. Qualified dividends, taxed like long-term capital gains, apply regardless of whether the dividends are used or reinvested.
Keep an eye on your mailbox or email, as brokerage firms will send out Form 1099-DIV for dividends and Form 1099-B for proceeds from asset sales. These investment-related forms will typically start arriving in February, and your brokerage may provide a consolidated version that you can use to calculate your tax obligations.
Tax Reporting on Bonds and Interest Income
Various investments, including bonds and bond mutual funds, may require a Form 1099-INT. Even “boring” interest-earning assets like money market funds and high-yield savings accounts can trigger reporting requirements. After the Federal Reserve cut interest rates three times, yields are significantly lower than the highs seen in 2025. Still, investors must report and pay taxes on any interest earned, which is taxed as ordinary income.
For those holding master limited partnerships (MLPs), waiting for the Schedule K-1 form is common, often arriving late in the filing season. MLPs aren’t subjected to federal income tax, so investors themselves are responsible for taxes on income distributions. These K-1s can be complicated, offering details about income, capital gains, and return of capital, according to Brian Kearns, a certified public accountant and financial planner in Evanston, Illinois.
If gathering these documents proves to be a hassle or if you’re prone to late filings, working with a financial advisor might streamline your tax process. For instance, reducing trading activity in taxable accounts could lessen the number of 1099s you receive. Additionally, it may be beneficial to reconsider where you hold income-generating assets. Bonds that are taxed as ordinary income could be better suited for tax-deferred or tax-free accounts.
“Before you invest in anything, consider what your tax implications will be and when those forms will be issued,” Varega advises. “Many people are caught off guard by these details.” She adds, “If it’s in an individual retirement account, it may not be an issue; but in taxable accounts, it could be problematic, so be cautious.”
