Full question:
I received a letter from the IRS stating we did not report the sale of mutual funds from our 1099-B form. They are saying this sale increased our taxable income $11,075 and we owe $2636 in additional taxes. I think this is an extremely high amount of tax due. Can you tell us what we can do?
- Category: Taxes
- Date:
- State: Michigan
Answer:
I suggest contacting your broker or the mutual fund company for information on the gains on the sale. Generally, the taxable gain is the difference between the purchase price and the sales price. Currently net capital gain is generally taxed at rates no higher than 15%, although, for 2008 through 2010, some or all net capital gain may be taxed at 0%, if it would otherwise be taxed at lower rates. There are three exceptions:
-The taxable part of a gain from selling Section 1202 qualified small business stock is taxed at a maximum 28% rate.
-Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum 28% rate.
-The part of any net capital gain from selling Section 1250 real property that is required to be recaptured in excess of straight-line depreciation is taxed at a maximum 25% rate.
Late payments are subject to penalities and interest, as well as the overdue tax amount, which may be as much as 47%. If you have a reasonable cause for the failure to pay the tax, the penalites may not apply. You may be able to settle for a lesser amount in an offer in compromise or arrange for installemnt paymments of overdue amounts.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
