Tax planning is usually the least of my financial concerns. Most of the time, just making a living, paying the bills and salting away money in suitable investments are much bigger deals.

But this is a special time of year. Tax season has begun, and brokerages and fund companies are sending out tax forms that the Internal Revenue Service requires for this year’s returns. A lot of them contain bad news.

Nearly everyone lost money in the markets last year — yet many people with investments in taxable accounts are just learning that their money-losing holdings are also generating tax bills. It may seem unjust, but under current rules, when a fund manager sells stocks and bonds that have appreciated in value, or when the fund pays out dividends and interest, these tax liabilities are passed along, even if your investment in the fund lost money.

What’s more, if you bought a fund shortly before it passed along taxable distributions in late December, you will have a tax liability for the fund’s activity over the entire year — even for the months when you did not own the fund.

“That’s an enormous problem with the structure of the markets now,” said Jeremy Roseberry, chief executive of FairShares, a financial services firm in Florida. “It needs to be fixed.”

For individual investors, there’s little you can do except consider issues that could make your future tax obligations less onerous.

The details are mind-numbing, but they matter. If you don’t pay close attention, you could end up with a nasty surprise.

Losses Plus Taxes

Consider that the S&P 500 lost more than 18 percent in 2022, including dividends, yet more than two-thirds of stock mutual funds made capital gains distributions, setting off potential tax liabilities for investors, according to Russell Investments estimates. Those distributions amounted, on average, to 7 percent of the investments in the funds — causing problems for anyone who held them in taxable accounts.

Many funds had long-term gains from the fabulous rallies of previous years, and as the market fell, managers sold securities that had run up in value. Those sales were “tax events.” If you bought a fund last year and held it in a taxable account, there is a good chance that you had the worst of both worlds: investment losses plus tax liabilities.

Some of these liabilities are eye-popping.

The Delaware Sustainable Equity Income Fund lost almost 6 percent last year, yet it made a capital gains distribution worth 60 percent of the fund’s total assets in December. Depending on your individual tax situation, as a shareholder you might have to pay 20 percent of the value of that distribution — or 12 percent of your investment — to the I.R.S. in capital gains tax.

That happened because the fund transformed itself in the middle of the year. Until August, it was the Delaware Ivy S&P 500 Dividend Aristocrats Index Fund. Then it shifted to an environmentally “sustainable” focus, the company said in an email, and its fund managers sold highly appreciated assets of companies that no longer fit its mandate, like Exxon Mobil, Chevron and Sherwin-Williams.

For a variety of funds, income from stock dividends and bond yields produced tax liabilities, too, even when a fund’s share price fell and investors lost money.

Where To Hold Them

These tax issues are widespread because most American households own mutual funds or exchange-traded funds, investment pools that can cut down on individual risk by providing immediate diversification. I prefer low-cost index funds that mirror the entire global stock and bond markets, but there are many other varieties, including those that are actively managed, or that make narrower bets on sectors or markets.

Whatever funds you use, the most straightforward way to avoid unpleasant surprises is to hold your investments in tax-sheltered accounts such as individual retirement accounts and 401(k)s. As long as your funds remain in these shelters, said Bryan Armour, who directs research into strategies based on index funds at Morningstar, the headaches I’m describing won’t apply to you.

“You want to take full advantage of tax-sheltered accounts,” he said in an interview. “A lot of these tax issues won’t affect you if you do.”

Defining Terms

Tax-sheltered accounts have become commonplace in the United States since the 1970s, largely as a replacement for the precious commodities that were already disappearing then: pension plans in which employers, not employees, bore the main responsibility for financing retirement; and higher education that families could afford without taking on exorbitant debt.

Tax-sheltered accounts don’t replace these social jewels. But if you work for a living, or have done so, and want to live reasonably well in the current world, you will want to explore the head-spinning range of tax-sheltered accounts.

Their unfortunate names are often borrowed from the I.R.S. tax code: 401(k), 403(b) and 457 workplace savings accounts, and 529 college savings accounts. Sometimes, they are mainly known by abbreviations — like I.R.A.s and H.S.A.s. (health savings accounts).

And some come in both “traditional” and “Roth” flavors (named after Senator William V. Roth Jr., a Republican from Delaware). The difference is that when you invest in, say, traditional accounts, you can immediately reduce your income taxes that year but will owe taxes later, when you withdraw the money. In Roth accounts, it’s the reverse: You don’t get a tax break for putting money into the account, but you won’t owe tax later.

How They Protect You

Here’s the crucial thing. What all of these tax-sheltered accounts generally do very well is insulate you from taxes on dividends, interest income and capital gains, as long as you hold your investments inside them.

So if you have a choice, try to emphasize tax-efficient funds in taxable accounts. Here’s more jargon: Exchange-traded funds (which can trade on the stock market all day) tend to be better, from a tax standpoint, than traditional mutual funds, Mr. Armour said. Index funds, which merely track markets, are typically more tax efficient than actively managed funds, which tend to trade more frequently. Bond funds and high-dividend stock funds tend to be less tax efficient than simple stock index funds.

All that said, having the resources to locate assets in specific accounts for tax efficiency is a great luxury. “Many people don’t have this choice,” said Joel Dickson, the Vanguard executive who leads the company’s tax planning research.

“Relatively few Americans have large investments in both taxable and tax-sheltered accounts,” he said. Just invest as intelligently as you can, he suggested, and try to emphasize tax-sheltered accounts. Core investment issues — should you own a particular fund, and if so, how much of it — are often more important than tax considerations.

Watch Out

Still, if you hold mutual funds within taxable accounts, watch for events that could set off tax liabilities. Abruptly shifting a fund’s focus, as the Delaware fund did last year, is a signal of potential trouble.

By October, fund companies usually indicate whether their funds are likely to be making large taxable distributions in December. You may want to avoid buying a fund that is about to do that, or you may want to sell shares if you already hold it and see big tax liabilities coming. Sometimes, it makes sense to sell if a fund’s value has declined so you can use that loss to offset other tax liabilities. That’s “tax harvesting.”

Unfortunately, these aren’t straightforward issues because simply by selling a fund, you may create a tax event for yourself — and have a liability for capital gains in the shares of the fund. Buying and holding funds for a decade or more is what I try to practice, and abrupt sales will defeat that strategy.

Sometimes, trouble is hard to foresee.

Last year, for example, when Vanguard cut costs for corporate retirement plan investors in target date funds, it inadvertently set off capital gains liabilities for investors who held these funds in taxable accounts. The company faces litigation in connection with the issue, and it has paid $6.25 million as part of a settlement with a Massachusetts regulator. Vanguard declined to comment.

These issues suggest that even careful, long-term investors need to be watchful, and even then, they may run into problems. There is plenty of room for regulatory reform, Mr. Roseberry of FairShares said. “We should have an efficient and transparent system, and, clearly, we don’t.”

For now, though, investors need to work within a flawed, complex system.

Welcome to tax time.