Cashing out a mutual fund and owing the IRS?
Question by Alyssa: 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?
Best answer:
Answer by v b
Are you sure you will owe anything?
I ask because while my $ 1000 mutual fund grew to $ 4000, it’s because 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….
What do you think? Answer below!
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Comments
You can make estimated taxes. You’ll need an accountant or CPA to tell you how much they think you might owe for 2008.
It sounds like you’re doing the right thing by contributing to a 401K and increasing your W4 contributions. My only suggestion to lower the amount you owe next April is to simply increase your $ 50 to a higher amount.
That might be enough, but you could always file a quarterly estimated return and pay some extra in. You might not owe as much as you think. Your basis is whatever you paid for it, plus capital gains and dividend distributions while you’ve held it – you only pay tax on the selling price minus your basis.
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