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By Jason Stipp | 02-22-2013 12:00 PM

Tax Tips for Your 2012 Return

Investors should take another look at their cost basis records, foreign tax credits, advisory fees, and any income that was spread to 2012 from a prior year's Roth conversion, says Investor Solutions' John Pitlosh.

Jason Stipp: I'm Jason Stipp for Morningstar.

It's Tax Relief Week on, and today we are checking in on all the things that should be on investors' radars for 2012 and 2013. There are a lot of things that investors need to keep track of. Here to help us is John Pitlosh. He is a financial advisor and a tax expert at Investor Solutions.

John, thanks for calling in.

John Pitlosh: Thank you.

Stipp: First question for you: Folks are still filling out their tax returns for 2012. You have a few things on your list that they may want to keep in mind as they're doing that activity. What should be on investors' radars for the 2012 tax year?

Pitlosh: Well, there are a couple of things to look at. Periodically, whenever I view tax returns of clients for the previous years, there are a lot of things that they miss and especially with new reporting requirements that all the custodians are doing, and the fact that the IRS is now actually checking, and the custodians are reporting your information for some of your transactions. It's important to make sure that the cost basis that you listed for the buys and sells that you have in any given year are actually correctly inputted on your 1099. So, I've noticed a lot of clients that can lose cost basis information actually end up paying more in taxes because they didn't keep good track of their investments--what they bought and sold.

There are a couple of new issues with the 1099s this year that cover mutual funds. There are things called "covered securities" or "covered transactions" and "non-covered transactions." Really what clients need to know is that the covered transactions are what are directly reported to the IRS. So, you definitely need to make sure that that information is correct. And with the "non-covered transaction," those are things that the IRS is still allowing individual investors to track themselves, and they can still maintain their own basis for those items. So, it's important that they have the covered and non-covered--it can get complex--but just making sure that they do a good job of keeping track, so they are not leaving anything on the table.

Stipp: John, a lot of investors are investing globally these days, more and more so. You say there are a few tax issues with foreign income that need to be on their radars as well?

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