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Tax question OT

YukonRon
YukonRon Posts: 16,984
Got a tax question. Hoping someone can help my ignorance in tax proceedures.
I sold some corporate stock, $10,000, of which $4,000 was held back for taxes, and the balance of $6,000 was paid out.
Do I still have to pay income taxes on the 6,000? Or do I get credit for the 4,000?
How does this work?

"Knowledge is Good" - Emil Faber

XL and MM
Louisville, Kentucky
«1

Comments

  • Foghorn
    Foghorn Posts: 9,795
    If someone else knows better, please chime in.  

    The sale of the stock is a form of income.  Either long term (if you held it for at least 1 year) or short term investment income.  

    The amount of taxable investment income is the total sale price minus the amount of money it cost you to buy and sell it (purchase price and any transaction costs like the brokerage fee).

    So, if you bought it for $2000 and paid a $50 brokerage fee on each transaction then your "cost basis" is $2100.  That means your income (appropriate term is "captial gain") is $7900.  

    Short term capital gains are taxed at your regular income tax rate.

    Long term gains max out at 20% (I think).  

    What's not clear to me is who kept your $4000.  The government - or your brokerage.

    If the government has it then the $4000 will be added to the total taxes you paid and you'll get what you deserve when you file.

    I don't what to say about the possibility that your brokerage is holding it.  

    I hope that helps.

    XXL BGE, Karebecue, Klose BYC, Chargiller Akorn Kamado, Weber Smokey Mountain, Grand Turbo gasser, Weber Smoky Joe, and the wheelbarrow that my grandfather used to cook steaks from his cattle

    San Antonio, TX

  • YukonRon
    YukonRon Posts: 16,984
    Foghorn said:
    If someone else knows better, please chime in.  

    The sale of the stock is a form of income.  Either long term (if you held it for at least 1 year) or short term investment income.  

    The amount of taxable investment income is the total sale price minus the amount of money it cost you to buy and sell it (purchase price and any transaction costs like the brokerage fee).

    So, if you bought it for $2000 and paid a $50 brokerage fee on each transaction then your "cost basis" is $2100.  That means your income (appropriate term is "captial gain") is $7900.  

    Short term capital gains are taxed at your regular income tax rate.

    Long term gains max out at 20% (I think).  

    What's not clear to me is who kept your $4000.  The government - or your brokerage.

    If the government has it then the $4000 will be added to the total taxes you paid and you'll get what you deserve when you file.

    I don't what to say about the possibility that your brokerage is holding it.  

    I hope that helps.
    It does and thank you so very much.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • lousubcap
    lousubcap Posts: 32,170
    @Foghorn - I followed that even on a Sat night and am glad you posted as I was thinking about trying to provide an answer.  Sounds like a side interest for you.  
    And I am all in with give 'em what you owe, but drive the "owe" to as low as you can.  If questionable interpretation, then I always side in my favor.  
    Most times that works out but I have been on the wrong side of that approach in the past.  I did not win the final debate.  FWIW-

    Louisville; Rolling smoke in the neighbourhood. # 38 for the win.  Life is too short for light/lite beer!  Seems I'm livin in a transitional period.
  • dmourati
    dmourati Posts: 1,265
    Seems to me you paid the $4,000 as taxes on the $10,000 sale. The $6,000 is net to you after taxes.
    Mountain View, CA
  • YukonRon
    YukonRon Posts: 16,984
    lousubcap said:
    @Foghorn - I followed that even on a Sat night and am glad you posted as I was thinking about trying to provide an answer.  Sounds like a side interest for you.  
    And I am all in with give 'em what you owe, but drive the "owe" to as low as you can.  If questionable interpretation, then I always side in my favor.  
    Most times that works out but I have been on the wrong side of that approach in the past.  I did not win the final debate.  FWIW-

    I am without morals on just about any vice you can think of, however, for some unexplainable reason, I try my best, to give my best guess, on taxes.
    It is just amazing to me every year how much of a tax burden we have. Takes a lot to make America great.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • YukonRon
    YukonRon Posts: 16,984
    dmourati said:
    Seems to me you paid the $4,000 as taxes on the $10,000 sale. The $6,000 is net to you after taxes.
    @dmourati
    Found the explanation under my 6th different pile of records and forms.
    Thank you for your kind help.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • caliking
    caliking Posts: 18,727
    You’ve already started doing your taxes??

    #1 LBGE December 2012 • #2 SBGE February  2013 • #3 Mini May 2013
    A happy BGE family in Houston, TX.
  • lousubcap
    lousubcap Posts: 32,170
    @YukonRon - I will offer that situation dependent, a good tax accountant will more than pay for their fees every year.  My little hic-cup was prior to that revelation.  I have been with the same practice (long distance now) for over 20 years. FWIW-
    Louisville; Rolling smoke in the neighbourhood. # 38 for the win.  Life is too short for light/lite beer!  Seems I'm livin in a transitional period.
  • lousubcap
    lousubcap Posts: 32,170
    @caliking - when you know you're gonna owe, it's nice to know about how much.  But I always ask for the damages Mon-Weds at the latest.  Don't want to totally ruin the weekend.  
    Louisville; Rolling smoke in the neighbourhood. # 38 for the win.  Life is too short for light/lite beer!  Seems I'm livin in a transitional period.
  • YukonRon
    YukonRon Posts: 16,984
    caliking said:
    You’ve already started doing your taxes??
    Yeah, we started earlier this year, My Beautiful Wife, is also a math grad, but, she takes taxes as an insult if she doesn't get them done prior to the deadline. Me, I am lazy. Procrastination is my station with taxes. I told her next year she wont't ever have to worry, I would rake care of them. 
    Tou will find me sometime during the day on the 15th, standing in line at HR Block.

    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • HeavyG
    HeavyG Posts: 10,324
    YukonRon said:
    caliking said:
    You’ve already started doing your taxes??
    Yeah, we started earlier this year, My Beautiful Wife, is also a math grad, but, she takes taxes as an insult if she doesn't get them done prior to the deadline. Me, I am lazy. Procrastination is my station with taxes. I told her next year she wont't ever have to worry, I would rake care of them. 
    Tou will find me sometime during the day on the 15th, standing in line at HR Block.

    No need to stand in line - just file an extension and then you can procrastinate for another few months.
    “Reality is that which, when you stop believing in it, doesn't go away.” ― Philip K. Diçk




  • YukonRon said:
    lousubcap said:
    @Foghorn - I followed that even on a Sat night and am glad you posted as I was thinking about trying to provide an answer.  Sounds like a side interest for you.  
    And I am all in with give 'em what you owe, but drive the "owe" to as low as you can.  If questionable interpretation, then I always side in my favor.  
    Most times that works out but I have been on the wrong side of that approach in the past.  I did not win the final debate.  FWIW-

    I am without morals on just about any vice you can think of, however, for some unexplainable reason, I try my best, to give my best guess, on taxes.
    It is just amazing to me every year how much of a tax burden we have. Takes a lot to make America great.
    Some people think avoiding taxes is a virtue. I’ve heard, too, that no one cares about what’s in a tax return, what financial motivations animate a chief executive (and his family), what conflicts drive a billionaire’s stewardship of our economy.  

    Me?  I like a strong defense. I like good roads. Good schools that educate our kids so they can fine a place in the undeniably global economy?  Sign me up — I’ll gladly pay for that. Is there waste?  Of course. Any system can be and will be gamed. The question is, can you trust the folks with their hands on the levers, turning the dials, fingers in the till?

    Don’t know about you (or others) but I’ve got a SICK tax cut coming. Like crazy sick. Personal cut, cut from what my investments are doing, and stock buybacks from the corporate cut.  I’m not Warren Buffet, but I am struck by his words:  “I don’t need it, I don’t want it!”  But he’s getting it, I’m getting it, and so many who NEED it are not. 

    I’ll make it right, or try to — upping charitable giving and reinvestment in my community. Many beneficiaries of the rich-folks’ windfall won’t. And that ain’t right. The system ain’t right. Just sayin’

    #saturdaynightpost
    #timetoegg
    It's a 302 thing . . .
  • YukonRon
    YukonRon Posts: 16,984
    HeavyG said:
    YukonRon said:
    caliking said:
    You’ve already started doing your taxes??
    Yeah, we started earlier this year, My Beautiful Wife, is also a math grad, but, she takes taxes as an insult if she doesn't get them done prior to the deadline. Me, I am lazy. Procrastination is my station with taxes. I told her next year she wont't ever have to worry, I would rake care of them. 
    Tou will find me sometime during the day on the 15th, standing in line at HR Block.

    No need to stand in line - just file an extension and then you can procrastinate for another few months.
    I have admired your thought process, but this, .......this takes it to a whole new level.
    Bow to the master...
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • lousubcap
    lousubcap Posts: 32,170
    The extension is all good but if you owe $$ you will also owe interest on the $$.  You become a bank for the gubmint.  Just sayin...
    Louisville; Rolling smoke in the neighbourhood. # 38 for the win.  Life is too short for light/lite beer!  Seems I'm livin in a transitional period.
  • YukonRon
    YukonRon Posts: 16,984
    lousubcap said:
    The extension is all good but if you owe $$ you will also owe interest on the $$.  You become a bank for the gubmint.  Just sayin...
    I am doing alright. Not complaining or fearing the process, just lazy and trying to be funny. Doing great on the first, the latter, not so much.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • RRP
    RRP Posts: 25,880
    Foghorn said:
    If someone else knows better, please chime in.  

    The sale of the stock is a form of income.  Either long term (if you held it for at least 1 year) or short term investment income.  

    The amount of taxable investment income is the total sale price minus the amount of money it cost you to buy and sell it (purchase price and any transaction costs like the brokerage fee).

    So, if you bought it for $2000 and paid a $50 brokerage fee on each transaction then your "cost basis" is $2100.  That means your income (appropriate term is "captial gain") is $7900.  

    Short term capital gains are taxed at your regular income tax rate.

    Long term gains max out at 20% (I think).  

    What's not clear to me is who kept your $4000.  The government - or your brokerage.

    If the government has it then the $4000 will be added to the total taxes you paid and you'll get what you deserve when you file.

    I don't what to say about the possibility that your brokerage is holding it.  

    I hope that helps.
    I agree with your explanation. May I add one more probable explanation? Somewhere in the typical "ten page fine print" agreement that he signed whenever he authorized his broker to withhold some tax percentage in the event of a sale. That clause is rather common in the fine print! 

    I know in my own case I have signed off on that agreement in effect with my brokers as I will assume any tax liability thus specifically holding them harmless for not withholding any potential tax liability.
    Re-gasketing America one yard at a time.
  • YukonRon
    YukonRon Posts: 16,984
    This is a great thread, thank you RRP.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • Jeremiah
    Jeremiah Posts: 6,412
    We wrote our check this morning. We kinda mis-calculated after selling both houses last year. Needless to say it's been a both a learning experience and a rough go the last two months.  
    Slumming it in Aiken, SC. 
  • YukonRon
    YukonRon Posts: 16,984
    Jeremiah said:
    We wrote our check this morning. We kinda mis-calculated after selling both houses last year. Needless to say it's been a both a learning experience and a rough go the last two months.  
    Yeah but,.... the next couple of years in your  upcoming venture will easily make up for the last year.
    Best of luck.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • KennyLee
    KennyLee Posts: 806
    edited April 2018
    YukonRon said:
    lousubcap said:
    @Foghorn - I followed that even on a Sat night and am glad you posted as I was thinking about trying to provide an answer.  Sounds like a side interest for you.  
    And I am all in with give 'em what you owe, but drive the "owe" to as low as you can.  If questionable interpretation, then I always side in my favor.  
    Most times that works out but I have been on the wrong side of that approach in the past.  I did not win the final debate.  FWIW-

    I am without morals on just about any vice you can think of, however, for some unexplainable reason, I try my best, to give my best guess, on taxes.
    It is just amazing to me every year how much of a tax burden we have. Takes a lot to make America great.
    Some people think avoiding taxes is a virtue. I’ve heard, too, that no one cares about what’s in a tax return, what financial motivations animate a chief executive (and his family), what conflicts drive a billionaire’s stewardship of our economy.  

    Me?  I like a strong defense. I like good roads. Good schools that educate our kids so they can fine a place in the undeniably global economy?  Sign me up — I’ll gladly pay for that. Is there waste?  Of course. Any system can be and will be gamed. The question is, can you trust the folks with their hands on the levers, turning the dials, fingers in the till?

    Don’t know about you (or others) but I’ve got a SICK tax cut coming. Like crazy sick. Personal cut, cut from what my investments are doing, and stock buybacks from the corporate cut.  I’m not Warren Buffet, but I am struck by his words:  “I don’t need it, I don’t want it!”  But he’s getting it, I’m getting it, and so many who NEED it are not. 

    I’ll make it right, or try to — upping charitable giving and reinvestment in my community. Many beneficiaries of the rich-folks’ windfall won’t. And that ain’t right. The system ain’t right. Just sayin’

    #saturdaynightpost
    #timetoegg


    I'm getting a cut too and I need it.....desperately.  Feel free to pay more than you owe since you seemed disillusioned with your cut.  As I remember, there's a line for just that on your return.

    As for the OP, hire an experienced local tax person.  Ask around to friends, neighbors or coworkers.  I found mine about 7-8 years ago and has saved me tons.  As another poster mentioned, my only regret was not finding one sooner.  And also file for an extension.  Unless you owe a ton, the interest is minimal.   

    LBGE

    Cedar table w/granite top

    Ceramic Grillworks two-tier swing rack

    Perpetual cooler of ice-cold beer

  • YukonRon
    YukonRon Posts: 16,984
    @KennyLee
    I do not owe, just amazed how much we paid on the Fed side.....and glad to pay it.
    Kind of a gee whiz moment, we are ok.
    "Knowledge is Good" - Emil Faber

    XL and MM
    Louisville, Kentucky
  • Foghorn
    Foghorn Posts: 9,795
    KennyLee said:
    YukonRon said:
    lousubcap said:
    @Foghorn - I followed that even on a Sat night and am glad you posted as I was thinking about trying to provide an answer.  Sounds like a side interest for you.  
    And I am all in with give 'em what you owe, but drive the "owe" to as low as you can.  If questionable interpretation, then I always side in my favor.  
    Most times that works out but I have been on the wrong side of that approach in the past.  I did not win the final debate.  FWIW-

    I am without morals on just about any vice you can think of, however, for some unexplainable reason, I try my best, to give my best guess, on taxes.
    It is just amazing to me every year how much of a tax burden we have. Takes a lot to make America great.
    Some people think avoiding taxes is a virtue. I’ve heard, too, that no one cares about what’s in a tax return, what financial motivations animate a chief executive (and his family), what conflicts drive a billionaire’s stewardship of our economy.  

    Me?  I like a strong defense. I like good roads. Good schools that educate our kids so they can fine a place in the undeniably global economy?  Sign me up — I’ll gladly pay for that. Is there waste?  Of course. Any system can be and will be gamed. The question is, can you trust the folks with their hands on the levers, turning the dials, fingers in the till?

    Don’t know about you (or others) but I’ve got a SICK tax cut coming. Like crazy sick. Personal cut, cut from what my investments are doing, and stock buybacks from the corporate cut.  I’m not Warren Buffet, but I am struck by his words:  “I don’t need it, I don’t want it!”  But he’s getting it, I’m getting it, and so many who NEED it are not. 

    I’ll make it right, or try to — upping charitable giving and reinvestment in my community. Many beneficiaries of the rich-folks’ windfall won’t. And that ain’t right. The system ain’t right. Just sayin’

    #saturdaynightpost
    #timetoegg


    I'm getting a cut too and I need it.....desperately.  Feel free to pay more than you owe since you seemed disillusioned with your cut.  As I remember, there's a line for just that on your return.

    As for the OP, hire an experienced local tax person.  Ask around to friends, neighbors or coworkers.  I found mine about 7-8 years ago and has saved me tons.  As another poster mentioned, my only regret was not finding one sooner.  And also file for an extension.  Unless you owe a ton, the interest is minimal.   

    Yes, despite my reasonable understanding of this, a good accountant costs hundreds and saves you thousands - and allows you to sleep at night.  

    As for picking an accountant, there is a spectrum of philosophies.  One end of the spectrum believes that if you don't get audited every year then they are pushing the envelope far enough.  Like others, I don't mind paying my share of taxes.  As a result, my accountant is from the other end of the spectrum.  He is extremely conservative.  I'm pretty sure that if I get audited, I will be owed money.  As a result, I sleep well.  

    XXL BGE, Karebecue, Klose BYC, Chargiller Akorn Kamado, Weber Smokey Mountain, Grand Turbo gasser, Weber Smoky Joe, and the wheelbarrow that my grandfather used to cook steaks from his cattle

    San Antonio, TX

  • Ozzie_Isaac
    Ozzie_Isaac Posts: 18,945
    I find if you never file, then there is nothing to audit.
    A bison’s level of aggressiveness, both physical and passive, is legendary. - NPS
  • Excuse me for saying so, but rather than ask a bunch of drunken, well-meaning screw balls you've never met important legal tax advice, perhaps a safer course of action is to have reserved a bit of the $6K and paid a reputable cpa for advice?  Am I the only one thinking this?
    Flint, Michigan
  • Ozzie_Isaac
    Ozzie_Isaac Posts: 18,945
    Excuse me for saying so, but rather than ask a bunch of drunken, well-meaning screw balls you've never met important legal tax advice, perhaps a safer course of action is to have reserved a bit of the $6K and paid a reputable cpa for advice?  Am I the only one thinking this?
    I just listened to a 6 part podcast on Bernie Madoff.   I am fully equipped to provide tax advice.
    A bison’s level of aggressiveness, both physical and passive, is legendary. - NPS
  • dorfami
    dorfami Posts: 50
    Pretty decent explanation from foghorn, but that 40% seems excessively high; backup withholding is generally 28%.  When you say corporate stock, is that a regular stock purchase or is this restricted stock/stock option, because then you potentially have other issues to deal with.
  • Excuse me for saying so, but rather than ask a bunch of drunken, well-meaning screw balls you've never met important legal tax advice, perhaps a safer course of action is to have reserved a bit of the $6K and paid a reputable cpa for advice?  Am I the only one thinking this?
    I just listened to a 6 part podcast on Bernie Madoff.   I am fully equipped to provide tax advice.
    Good point!  Carry on.
    Flint, Michigan
  • I can see @YukonRon  is going to be paying for advice with rubs or brisket  or something.
    Flint, Michigan
  • dmourati
    dmourati Posts: 1,265
    That wasn't tax advice, just a pointer in the right direction. You sign your own name on your taxes or have your preparer do so for you. Buck stops there.
    Mountain View, CA
  • FrostyEgg
    FrostyEgg Posts: 579
    The taxes should be based on short term vs long term gains/covered vs. non-covered tax lots etc. I work with brokerage/managed accounts, but i'm not a tax professional. Happy to explain brokerage account activity, but IMO you can't put a price on a good CPA.