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:
If you received a letter from the IRS about unreported mutual fund sales, start by contacting your broker or the mutual fund company to get details on the gains from the sale. Generally, the taxable gain is calculated as the difference between the purchase price and the sales price.
Net capital gains are typically taxed at rates up to 15%. However, for certain years, some net capital gains may be taxed at 0% if they fall within lower tax brackets. Note the following exceptions:
- Gains from selling Section 1202 qualified small business stock may be taxed at a maximum of 28%.
- Gains from selling collectibles (like coins or art) may also be taxed at a maximum of 28%.
- Gains from selling Section 1250 real property that require recapture beyond straight-line depreciation may be taxed at a maximum of 25%.
Be aware that late payments can lead to penalties and interest, which may increase the total amount owed significantly. If you have a valid reason for not paying the tax on time, you may be able to avoid penalties. Additionally, you might qualify for an offer in compromise to settle for a lesser amount or arrange installment payments for 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.