Sounds like your explanation is for those who qualify for and maintain "trader status". We don't know that from OP.
And speaking of "mofo"... you qualify for your unqualified presumption!!
Do 1256 gains require quarterly tax payments, assuming no other income
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Sounds like your explanation is for those who qualify for and maintain "trader status". We don't know that from OP.
And speaking of "mofo"... you qualify for your unqualified presumption!!
The IRS expects you to cover 90% of your 2020 tax liability OR 100% (110% if income is high enough) of your 2019 tax liability through quarterly estimated taxes.
Normally you cover over 90% of current year liability through payroll, however, this year you will not. The easiest thing to do is the 100/110% of prior year because you have no idea what you are going to make throughout the year. Fortunately you have until July 15 this year to figure out what you owe for Q1 and Q2.
Normally you cover over 90% of current year liability through payroll, however, this year you will not. The easiest thing to do is the 100/110% of prior year because you have no idea what you are going to make throughout the year. Fortunately you have until July 15 this year to figure out what you owe for Q1 and Q2.
the mofo was just playful , that is why i used the word politely, I didn't mean to offend
The assumption in the original query was that he had no other income. If he is day trading regular he should naturally apply for trader status
not for 1256 contract
and if he has no other income, he should apply for trader status and elect 475f,
why are we going into circles?
Section 1256 contracts and straddles are named for the section of the Internal Revenue Code that explains how investments like futures and options must be reported and taxed. Under the Code, Section 1256 investments are assigned a fair market value at the end of the year. If you have these types of investments, you'll report them to the IRS on Form 6781 every year, regardless of whether you actually sell them.
There are requirements to qualify and ongoing requirements to maintain "trader status"... and you can't claim such status retroactively.... Logically, most who ask this question have yet to qualified as such, or they would already know. If that's the case, then their taxes get no special treatment are are required to be paid as though they were "interest". That's my point.
fair enuff,
but on a separate matter, 1256 contracts, by default, report EoY
1256 contracts, by default, get mtm status
1256 contracts have different tax rates
60% long term
40% short term
weighted avg of 23%
I don't know whether you have a point on this or not.
Interest payments are also reported EOY on 1099, yet IRS "presumes" you know about the interest income in real-time and are required to make estimated tax payments in a "timely fashion"... ie, quarterly.
Years ago I ran a financial planning practice for fee. No client ever asked me about this, but if one had I would had advised, "pay estimates on net gains up to quarterly tax filing date". No penalties if you do that, and if you end up paying too much in estimates, you'll get it back in a refund. I'd offer the same guidance today.
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You do not want to make a 475 election b/c 1256 contracts are already marked to market without it. If you make the 475 election you lose the 60/40 tax treatment. If you are profitable and expect to owe more than 1K at year end you have to make quarterly ES payments regardless.
"Section 475 election
Traders eligible for trader tax status (TTS) are entitled to file a timely election for Section 475 ordinary gain or loss treatment on securities and or commodities (including Section 1256 contracts). Generally, Section 475 is smart for securities traders, but not most 1256 contract traders. Ordinary losses are usually better than capital losses; however, ordinary income rates are worse than 60/40 capital gains rates."
source:
https://greentradertax.com/trading-futures-other-section-1256-contracts-has-tax-advantages/
i had elected 475 and still reported my 1256 contracts on the 6781 form and never had a problem
so i am not sure you lose your tax advantage of 1256
we need to be carreful what's written on the internet especially when you just advised above we had to pay taxes quarterly