Tax Debt Problems
Lock in Gains or Losses
Speaking with an expert may be wise in considering the sale of capital assets, specifically stocks. However, selling a poorly performing asset could be beneficial tax-wise. Under current law, with all other factors considered, a taxpayer can receive a reduction of up to $3,000 of the amount of income subject to tax due to a loss on the sale of capital assets; such as stock. Sometimes we just make the wrong selections, and while we can hold on to the asset in the hopes of a rebound in price, letting a losing stock go can provide the benefit of lowering your tax bill.
On the other side of the coin, selling stocks or other assets that have increased in value at the right time can also minimize taxes. The capital gains tax rate has changed over recent years. For a large portion of the population, the tax rate on long-term capital gains is 15%, while those with the highest of incomes can pay as much as 20%. However, taxpayers in the 10% or 15% tax brackets pay 0% tax on capital gains. When we pick winners in the stock market, the overall ‘net’ gain is determined after taxes are paid. Obviously paying 0% tax is far better than 15% or 20%.
There are those times when things do not work out so well for the taxpayer and they find themselves in trouble with the IRS. Unpaid tax debts are stressful and create, for many, a desire to retreat from facing the nation’s largest bureaucratic adversary, the Internal Revenue Service (IRS).