Author Topic: Taxable fund sold at the begining of 2014, when to pay the taxes?  (Read 3318 times)

schimt

  • Bristles
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I sold a mutual fund from American Funds, that I have in order to move it over to my Vanguard account. The transaction did not happen until just after the new year.

My question is with the taxes associated to this transaction. Can and should I pay the taxes against my 2013 filing, or must i wait until i file my 2014 taxes in 2015?

Only reason I ask is because I know you can contribute to an IRA up to april in the next year. Also my return as it is will probably cover the taxes associated to the sale of this fund, so it would be convinient to get it out of the way.

Thank you in advance.

Nothlit

  • Bristles
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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #1 on: January 22, 2014, 12:53:25 PM »
If the transaction occurred in 2014, then it will be reflected on your 2014 tax forms that you will file in 2015. There is no way, as far as I know, to somehow cram that tax event back into the previous year's taxes. However, there is nothing preventing you from going ahead and paying estimated 2014 taxes to the IRS, but this would be separate from your 2013 tax filing. In fact, depending on the amount of tax generated by this transaction, it might be a good idea to pay the estimated tax to avoid any underpayment penalty when you file next year (there are exceptions to the underpayment penalty, though, so you may not have to pay estimated taxes if for example you have sufficient withholding through a regular job).

schimt

  • Bristles
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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #2 on: January 23, 2014, 10:58:53 AM »
Perfect, thank you for the advice.

The sale was around $7000, i believe my regular witholdings will cover it, i will just not receive a return next year, which was my goal to adjust my witholdings on my W4 to come closer to no tax return.


Another question i have, and no reason to start another thread. I receive a 1099-DIV from vanguard, which includes my reinvested dividends of close to $300. I have no kids, not married and I do not own a home, so taxes are relatively simple for me. I historically used Turbo Tax with no complaints, but always the simple free one. In the description of the different editions (plus, deluxe ect) that the deluxe edition include investments. Do i need to use the deluxe edition for this simple tansaction marked on the 1099 or will the free version cover this?

Thanks again for the support

schimt

  • Bristles
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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #3 on: January 24, 2014, 09:17:10 AM »
Yea, i'm sure that it will just automatically upgrade. I will try that route first. It's so easy can't complain and will just try. Thanks

Nothlit

  • Bristles
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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #4 on: January 24, 2014, 12:59:00 PM »
I doubt you will need to upgrade to the deluxe version just to file a 1040A. I use TaxAct.com (free version) and it supports this just fine.

FYI, I think you have mixed up the terminology of "tax return" and "tax refund", which is a common mistake that people make. "Tax return" refers to the paperwork you file with the IRS every year, while "tax refund" refers to the money you get back (if any). Not trying to nitpick, it's just that using the wrong terminology can be confusing sometimes!

MustachianAccountant

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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #5 on: January 24, 2014, 01:03:51 PM »
Instead of filing estimated taxes for next year, you could just let the IRS keep all or a portion of this year's refund to apply to next year's taxes. It's on line 75 of the form 1040.
Though it sounds like you may not need to do this if your paycheck withholdings will simply cover the tax.

I'm confused by your comment about IRAs... your American Funds account was NOT a retirement account, correct?

schimt

  • Bristles
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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #6 on: January 27, 2014, 05:44:56 AM »
I'm confused by your comment about IRAs... your American Funds account was NOT a retirement account, correct?

Correct, my curiosity about when you can pay taxes for a sale early in the year was due to the fact that I know you can add to last years IRA in the first quarter of the New Year. I am not eligible for a traditional IRA, but my original intention was to move those funds into traditional IRA against 2013, which would be tax deductible and partially or fully cancel out the taxes that I owe for the sale of the American Funds account. Not the case, so it doesn't matter much now.

Thanks again.

Dezrah

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Re: Taxable fund sold at the begining of 2014, when to pay the taxes?
« Reply #7 on: January 27, 2014, 11:27:14 AM »
FYI, I think you have mixed up the terminology of "tax return" and "tax refund", which is a common mistake that people make. "Tax return" refers to the paperwork you file with the IRS every year, while "tax refund" refers to the money you get back (if any). Not trying to nitpick, it's just that using the wrong terminology can be confusing sometimes!

I'm pretty sure this is a mistake I make all the time.  Thanks for clearing that up.

Also, you get bonus points for being so careful to make clear that you're just trying to helpful and not condescending.  It's quite cute actually, and I mean that in a nice way ;)