Receiving a Federal Refund on the sale of a stock?

[4myshasta]

I inherited a stock (8/6/14) which sold prior to the close of the estate (9/9/16).
Although Federal did withhold on this sale, my refund is larger than the withholding.
I can't find anything saying I am entitled to a refund on the sale of a stock.
Only that a sale will impose a tax.

My question is~Why am I receiving a Federal Refund?

[TomYoung · Accepted solution]

"My question is~Why am I receiving a Federal Refund?"

First off, you really can't look at any one transaction or any one amount withheld and somehow associate that with your refund.  Your refund is calculated as: 

                               (Tax on all your taxable income) - (taxes paid from all sources)

Even absent this particular stock sale you might have been due a refund anyway if you had more taxes withheld from your paycheck then was necessary. 

Looking at the 1099-B that you posted it's very clear that the taxes withheld here were much more than was necessary.  You reported a long term capital gain of $903.25 and that gain might have been taxed at a rate as low as 0%, (if you're in the bottom two income tax brackets), or perhaps at 15%, (if you're out of the bottom two tax brackets), but in any case the amount withheld was well in excess what was necessary.  

If you add together the refund that you might have been due absent this transaction and then the refund that clearly is generated by this transaction, then you easily could have a refund that's more than the amount withheld on the 1099-B.

Tom Young

[4myshasta]

I should have added~Being self employed and the fact that I didn't pay quarterly, I was prepared to pay in.
It was showing I owed about $600 until I entered this stock.
As much as I want this number to be correct, it just doesn't "feel" right.
Even though I've entered and REentered these numbers numerous times!

Thank you for your input Tom!

[TomYoung]

You don't go by "feel", you figure it out.  Before you file - and you should ALWAYS do this - you print out your entire income tax return and go over it page by page.  Given this new information it does seem like something's wrong since I can't think of why this would be happening.  I'd say you print out your income tax return with and without this sale and compare the two line by line.  I'd be interested in what you figure out.

[4myshasta]

I went to get oil changed and oddly enough, his wife, an accountant, was there.
She said that because my adjusted gross income is lower than $20,000, this number is correct.
(Maybe should have added that bit of info when asking the question (?) but that never even occurred to me.)

[TomYoung]

Well, I'm an accountant, too, or at least used to be and that answer doesn't hang together for me.  Having an AGI of less that $20K certainly means that the LTCG is going to be taxed at 0%, but even so the trade DID increase your income and (-$600 + $4,437) still isn't greater that $4,437.

[4myshasta]

It raised my income by $800.
Getting a refund MORE than what the federal withheld doesn't make sense!
Especially when that is even more since I should owe because I didn't pay quarterly.(?)

Again, it doesn't "feel" right OR "look" right 😉 but I am entering the numbers as I received them from form 1099-B.
I have 1 other stock that I don't have the option of uploading although I did when asking this type of question elsewhere and the Federal withholding on that 1 is $927.

[TomYoung]

"It raised my income by $800."

In my comment "(-$600 +$4,437) still isn't greater that $4,437" I was speaking about the amount of taxes your said you owed before entering the trade - "It was showing I owed about $600 until I entered this stock - and pointing out that adding withholding of $4,437 to an "owed" amount of $600 DOESN'T put you into a position of having a refund of more than the withholding, which you said you had - "refund is larger than the withholding."

" have 1 other stock that I don't have the option of uploading although I did when asking this type of question elsewhere and the Federal withholding on that 1 is $927."

I don't know what that sentence is saying but if you have an amount of withholding of $927 that wasn't entered when you say " I owed about $600 until I entered this stock" then that could be the reason you're getting a refund that's more than the $4,437 of withholding.

[4myshasta]

Federal Refund W/Stocks entered~$4,800

When I delete 1099-B (not pictured) with informations as follows~
Inherited
Sold 09/23/201
Box 1d Proceeds~$3,312
Box 1e Cost/Basis~$3,881
Box 4~Federal Income Tax Withheld~$927

Federal Refund=$3,882

When I ALSO delete 1099-B (above)

Federal=I OWE~$555.00

Thank you for your time Tom and I hope this adds to some sort of explanation!!

[TomYoung]

Well now you know!