Do I have to pay Capital Gains Tax or just Income?
Yes, the IRS knows you have the money. All securities are registered and tracked. Yes, you have to pay a different type of taxes on income from the sale of securities. You only need to pay taxes on the profit from the sale of the securities if you actually sold them and still do not hold them. You need an accountant who can save you big$ when it comes to evaluating your three years of income and securities. Get a local CPA or you will wind up paying more in taxes and penalties.
The IRS has records of any stock sales. You will report the gain or loss on the sale of stock. If you have a gain you will pay capital gain tax. Long-term capital gains are taxed at 0% to the extent the taxpayer’s taxable income is in the 10% or 15% tax brackets. The 0% rate applies for tax years 2008 through 2010. But parents beware the kiddie tax, which may require that your child pay tax on her unearned income over $1,900 as if you received it. The link below will give you some Information on the basis. Christine EA Master Tax Advisor This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. http://www.hrblock.com/tax_professionals…
the cash is taxed as ordinary income. Having said that, stocks that you have for one year or longer are considered long term investments and the profit you realize is taxed at 15%. When you sell those shares the broker you sell them through will submit a form to the IRS in your name. So the IRS will know about your stock selling. Keep in mind, you are only taxed on your profit which is the difference between the face value on the stock and the selling price on the day you sell them.
