Question : Cashing out a mutual fund and owing the IRS?
I cashed out a $6,000 mutual fund and know I will owe a lot on my 2008 taxes. How can I start "paying back" the IRS now to avoid dept in April? I've started contributing more to my 401K to lower my taxable income and I've increased my W4 contributions to claim 0 and take out $50 extra per pay check. Any other suggestions?
- asked by Alyssa
All Answers:
Answer #1
Are you sure you will owe anything?I ask becausewhile my $1000 mutual fund grew to $4000, it'sbecause I reinvested my dividends along the way. My cost basis at the time of sale was actually$4200, so I had a loss not a gain....
- answered by v b
Answer #2
You can make estimated taxes. You'll need anaccountant or CPA to tell you how much they thinkyou might owe for 2008.
- answered by Give&Take 2008
Answer #3
It sounds like you're doing the right thing bycontributing to a 401K and increasing your W4contributions. My only suggestion to lower theamount you owe next April is to simply increaseyour $50 to a higher amount.
- answered by The Robster
Answer #4
That might be enough, but you could always file aquarterly estimated return and pay some extra in. You might not owe as much as you think. Yourbasis is whatever you paid for it, plus capitalgains and dividend distributions while you've heldit - you only pay tax on the selling price minusyour basis.
- answered by Judy
Answer #5
It seems like the steps you are taking will morethan compensate for any additional tax owed. Thetax on your mutual fund will be in two parts: theincome generated by the fund before you sold it,and the long-term gain on the fund when you soldit. Most of your additional tax will be fromlong-term gain, which is at most 15%, or no morethan $900. Probably a lot less.
- answered by ninasgramma
| 
measure and fulfill your financial needs
