I did not sell any stocks. Why am I being charged taxes?

Forum|Forum|1 year ago
February 9, 2025
3 replies
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My mutual funds have a capital gain of $5284.29. I did not sell any stocks, so why am I being taxed?

Best answer by VolvoGirl

Capital Gains should be on a 1099 DIV in box 2a. Those are gains the fund made inside the fund. When you sell shares you will get a 1099B for sales.

SharonD007

Mutual funds distribute dividends and capital gains over the year. They are paid to you or they are reinvested, so even if haven’t sold any stock, you have to report the gain on your tax return.

Review the IRS FAQ Reporting capital gains on Mutual Funds for more information and the TurboTax article A Guide to the Capital Gains Tax Rate: Short-term vs. Long-term Capital Gains Taxes.

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amyg55Author

I am being charged half of the increase as if it were regular income. That's an awful lot of money for the government which they are going to tax AGAIN when I do withdraw the money to use for myself! The government rips us off from the time we are born until we die. Our fore fathers would be appalled at the way the government is treating the PEOPLE of this country.

Trudella

This happened to me this year too. I have never seen such a high amount of capital gains being taxed until this year. I didn’t even make a withdrawal from my brokerage account. I am so devastated 😢

VolvoGirlAnswer

Employee

Capital Gains should be on a 1099 DIV in box 2a. Those are gains the fund made inside the fund. When you sell shares you will get a 1099B for sales.

amyg55Author

Right, I know this. I know they are gains from the stock. I am still being taxed on the capital gains as it it were regular income. I had no idea that this was how mutual funds work. I have done my own taxes for years and this is the only time I have even seen a huge amount being taxed as if it were income. Had I known, I would have transferred all into an account non-taxable until I actually cash out and use the money.

VolvoGirl

Employee

Even though it shows up as income on the first page,if you have capital gains or qualified dividends the tax is not taken from the tax table but is calculated separately from schedule D. The tax will be calculated on the Qualified Dividends and Capital Gain Tax Worksheet. It does not get filed with your return.

In the online version you need to save your return as a pdf file and include all worksheets to see it.

For the Desktop version you can switch to Forms Mode and open the worksheet to see it. Click Forms in the upper right (upper left for Mac) and look through the list and open the Qualified Dividends and Capital Gain Tax Worksheet. And you will need to use this IRS worksheet on page 15.

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

baldietax

Used to hate getting these cap gains. If it's an actively managed fund with a lot of turnover in holdings and history of large cap gains distributions but you like the fund then it may be better off in a tax deferred account (IRA/ROTH) if you have that. Also look out for buying funds in taxable accounts just before the ex date for these distributions usually late in the year, or you end up paying taxes on cap gains but didn't see any benefit from any associated price appreciation over the year. Generally, index funds or ETFs may be more efficient for a taxable account but it depends on the fund. If you are using Schwab, Fidelity etc there may be materials or advisors available to you that can help look at this topic in more detail.