Because of the complexity of IRS tax laws, owing taxes on mutual funds happens more than one would think.  It occurs when a fund manager sells a stock, or other asset, that is held within the fund, for a gain.  The taxable capital gains are passed on to the owner of the fund. 

Let’s say you own ABC Fund and the manager bought shares of Google @ $200/share and six months later sold it for $300/share.  Initially this looks great.  The manager made money for the fund.  But mutual funds are made of many different stocks and if the value of the other shares “in the basket” cause the price of the fund to decline – then you sell it at a loss – you would be required to pay capital gains on the capital gains of the google sale.

Although this is a simple example, it is important to understand if you own a mutual fund.  If you are concerned or want to know more about mutual fund tax implications, contact your financial adviser or tax accountant.

New York State has declared war on the Indians.  Governor Paterson has demanded  taxes on Indian cigarettes retailers. The issue is that Indian tribes are allowed to sell cigarettes untaxed to Native Americans but are supposed to collect taxes on cigarettes and tobacco products to non-Indians.

With unemployment down and tax receipts plummeting, the governor is looking to close a huge budget gap.  And now he is ready to scalp the Indians to get his hands on the projected tax monies that the Indians has previously never charged. 

“It hasn’t been collected in a very long time, so it’s obviously going to be difficult, but we think we took a step [Monday] that is a firm step in the direction of making that happen,” Paterson said.

The new law will prohibit manufacturers from selling tobacco without a state tax stamp to any wholesaler who won’t promise the cigarettes won’t be resold tax-free by New York tribes.

Violators could have their licenses revoked and could be prosecuted criminally for perjury or filing a false instrument, the governor said.

Lawmakers say the law could mean hundreds of millions of dollars a year going to the cash-strapped state. Paterson said it could be closer to $62 million. The state excise tax is $2.75 a pack.

The Inidan tribes see the law as a threat to their sovereignty and have threatened possible legal action.

“Attacking tax-free commerce in our territories is short-sighted and disastrous for us and all of western New York,” said Barry Snyder, president of western New York’s Seneca Nation.

“The issue here is not cigarettes, but the protection of the Nation’s treaty rights. We will do what it takes at the right time to protect those rights.”

The state of New York, like many other states are in a “state of panic” in trying to balance the budget.  Looks like Uncle Sam will be the only thing to bail out many states.

Gov. Paterson – leave the Indians alone!

In these troubling times we need all the help we can get.  But did you know the IRS may be able to help you during these economically challenging times?  Here are 10 things to know”. 

1. Recovery Rebate Credit: If you didn’t get an economic stimulus payment this past summer and didn’t file a tax return, you may be eligible for the Recovery Rebate Credit . See IRS.gov for details.

2. The Alternative Minimum Tax has been ‘PATCHED”. For 2008, the exemption amounts are $69,950 for married couples filing jointly and $46,200 for single individuals . More information is available at IRS.gov.

3. Cancellation of Debt income: If you have had or will have a home foreclosure, check out the tax rules at IRS.gov. Things may not be as bad as you think.

4. Commuting: If you ride your bike (bicycle) to work in 2009, it could be worth $20 a month, tax free from your employer. See IRS.gov. for more.

5. Deductions: The new additional standard deduction for non-itemizers can be as much as $500 or $1,000 if you are married, filing a joint return. Go to IRS.gov for details.

6. Election to Deduct Sate and Local General Sales Tax: You have an option when itemizing. Claim either State and local general sales taxes paid or state and local income taxes paid, but not both. IRS.gov has more.

7. Mileage: The standard mileage rate is changing from 59.5 to 55 cents per business mile as of Jan. 1, 2009. More information at IRS.gov.

8. Homebuyer Credit: The new “First Time Home Buyers Credit” is for a home purchased after April 8th, 2008 and before July 1st, 2009 and could be worth as much as $7,500. Do you qualify? See IRS.gov.

9. Residential Energy Property Credit: This credit has been re-instated for 2009 and is worth up $500 for up-grading your home with certain energy efficient items. See if you qualify at IRS.gov

10. Plug-in Electric Drive Motor Vehicle Credit: Buy a new plug-in electric car and get a credit of $2,500 or more. See IRS.gov about this today.
And one more for “tax credit”:

11. Record Keeping: Make sure you don’t omit or forget an item so you pay only the correct amount of tax – no more, no less. See IRS.gov for more details

source= az family