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Estimated Taxes questions
- Thread starter gambler2075
- Start date
Quote from gambler2075:
But in the estimated taxes situation, it is not like the quarters are separate from each other, in the way that YEARLY taxes are separate from each other, right? So in that case, if you screwed up in the second half of the year and ended flat, you wouldn't owe any taxes.
I don't know the answer to this. But I think while you may not owe any taxes but you are liable to penalties. Check with your CPA perhaps.
Quote from Bolimomo:
I don't know the answer to this. But I think while you may not owe any taxes but you are liable to penalties. Check with your CPA perhaps.
If you have no tax liability by year end, you have no penality.
What a novel idea, talking to a CPA vs taking the advice on here!
good cpa for traders = hard to find. i know green does it (you'll see his name mentioned on ET), there are others.
oh! forgot one cool rule, which i think is what might be the "safe harbor" rule. roughly...
if you make, let's say, 50k in 2009.
and the next year, you make 200k...
you do NOT get penalized if you're "late" (ie. pay in 2011 for 2010 estimated taxes) on any amount more than 110% of that 50k. the next year, your number would be 200k * 110%.
i'm fairly certain it's 110%. again, check the IRS stuff, because it's in there.
oh! forgot one cool rule, which i think is what might be the "safe harbor" rule. roughly...
if you make, let's say, 50k in 2009.
and the next year, you make 200k...
you do NOT get penalized if you're "late" (ie. pay in 2011 for 2010 estimated taxes) on any amount more than 110% of that 50k. the next year, your number would be 200k * 110%.
i'm fairly certain it's 110%. again, check the IRS stuff, because it's in there.
Quote from gaj:
good cpa for traders = hard to find. i know green does it (you'll see his name mentioned on ET), there are others.
oh! forgot one cool rule, which i think is what might be the "safe harbor" rule. roughly...
if you make, let's say, 50k in 2009.
and the next year, you make 200k...
you do NOT get penalized if you're "late" (ie. pay in 2011 for 2010 estimated taxes) on any amount more than 110% of that 50k. the next year, your number would be 200k * 110%.
i'm fairly certain it's 110%. again, check the IRS stuff, because it's in there.
Ooh, that would be awesome... because since I only made like 150K$ trading in 2009, then since I am on track to make well over that this year (knock on wood, I know... since I have already made 300K$ in the first 4 months) then you are telling me that I might not be penalized if I paid the estimated taxes for the amount I made the previous year?)
I really gotta check on this stuff... I thought I already owed like 80K$ taxes on april 15th...
thanks alot, guys...
g
Quote from gambler2075:
Ok, I think I am going to have to enlist the services of a CPA to handle this stuff... never had to do it before, but I think this is too much of a pain in the butt to deal with myself. Anyone have any ballpark figures how much that costs?
g
Don't waste your time hiring an "expensive" CPA - he will charge you based on your superlative earnings. Instead, use a free tax estimator:
http://turbotax.intuit.com/tax-tools/
and pay your estimated taxes 4 times per year, on both the federal and state (if applicable) levels (can easily be done electronically). Whether you want to underpay or not, and risk the under-payment interest penalty - well, only you can figure that out. If you think you can get a better return by using the tax money for trading, then go for it. If you lose all that gained money (hope U don't), then the worst case is that you will get a big fat refund the following year, and Uncle Sam will thank you implicitly for the free loan that you gave them during the year.
Quote from gaj:
oh! forgot one cool rule, which i think is what might be the "safe harbor" rule. roughly...
if you make, let's say, 50k in 2009.
and the next year, you make 200k...
you do NOT get penalized if you're "late" (ie. pay in 2011 for 2010 estimated taxes) on any amount more than 110% of that 50k. the next year, your number would be 200k * 110%.
i'm fairly certain it's 110%. again, check the IRS stuff, because it's in there. [/B]
You are correct in the 110 % rule, but that rule only lasts for 1 year, as I understand it. The 2nd year you will get hit hard by penalties. Effectively, the IRS allows you that one year grace period, for earning a significantly different amount the 2nd year from the 1st year. You should be able to find out the answers to this definitively on the IRS website (www.irs.gov). Ask 10 different CPA's the same question, and you'll get 10 different answers.
Quote from hayman:
You are correct in the 110 % rule, but that rule only lasts for 1 year, as I understand it. The 2nd year you will get hit hard by penalties. Effectively, the IRS allows you that one year grace period, for earning a significantly different amount the 2nd year from the 1st year. You should be able to find out the answers to this definitively on the IRS website (www.irs.gov). Ask 10 different CPA's the same question, and you'll get 10 different answers.
But does the 110% rule also count from the 2nd year to the third year? let's say I end this year making 300K$ on my trading, and the next year I made 500K$
does that 110% rule hold for the 500K$ year as well (in that I could invoke safe harbor AGAIN and only have had to pay taxes on 330K$, without getting a penalty?
Or are you only allowed to invoke safe harbor once?
g
Quote from gambler2075:
But does the 110% rule also count from the 2nd year to the third year? let's say I end this year making 300K$ on my trading, and the next year I made 500K$
does that 110% rule hold for the 500K$ year as well (in that I could invoke safe harbor AGAIN and only have had to pay taxes on 330K$, without getting a penalty?
Or are you only allowed to invoke safe harbor once?
g
I'm pretty sure that you can only execute it once, and not 2 consecutive years (this happened to me a bunch of years ago, for my non-trading related business. However, I'm unsure if things "reset" again. For example, if year 1 you underpay but are within your 110 %, you receive your grace period. Year 2 you pay the right amounts, and are within standing. Year 3, again you underpay, but are within the 110 % rule - did things reset after Year 2, so that you are eligible for "safe harbor" again ? That I do not know.
You can find a lot of good stuff on the www.irs.gov site. I would suggest plowing through that site, which should give you a definitive answer on it, rather than seeking out an expensive CPA, who may lead you down the wrong path.