Do I have to reinvest this money to avoid higher taxes?

I recently sold some stock and didn't want to buy new stock. So, I put all the money into a Money Market Prime Fund. Am I going to get taxed badly on this. Someone told me I have to reinvest it before the year is out and I'll be ok.

The "someone" who told you that was wrong. If you sold the stock at a gain, you have to pay taxes on the gain, and what you do with the money does not change the taxes due.

You need to figure out what your basis is - that's what you paid for it, any commissions on the trades buying and selling. If you reinvested dividends, you paid taxes on the dividend amounts while you had the stock, so that adds to your basis.

Talk to a tax attorney or go to H and R Block.

Unless the stock was in an IRA, 401k or something of that sort reinvesting it will have no effect on the taxablity. It is difficult to say what effect this will have without more information. You may want to consult with a tax professional as you are running out of time to compensate if you will have tax due.

From the information you have provided, reinvestment is not an option. What you really need to know is how to calculate the amount of gain before worrying too much about this. How much did you pay for the stock when you bought it? How much did you receive when you sold it? The difference between those to amounts will give you your gain (OR LOSS). Once you know that figure, more questions need to be answered but, if it's a small gain or, better yet, a loss, you really are stressing over nothing.

Listen carefully cricket. Once you sold the stock any gain you have or loss applies in the tax year of 2006. If you held the stock for one year or longer the gain is called "long" and is only 5% if you are in the 15% bracket. Example===if you bought stock for $ 2,000 and held it for a year or longer and sold it for $ 4,000 you would have a gain of $ 2,000; which would have a federal income tax bite of $ 100.00. If you sold the stock at a loss; less than you bought it for; then the loss can be taken against other income on your return.