The IRS might come after me

InvestorTerry · Nov 30, 2006

It usually takes two years for the IRS to catch up to you. First the amount on the 1099 for that year, they will say you owe taxes. Then you get your cost basis and put against your trades to determine if you made a profit or not on Sch D

jmccain · Nov 30, 2006

This is the same as trading with borrowed money, therefore it will be cheaper to use your line of credit that will surely cost less than what the IRS will charge you.

Quote from Optionspoet:

Just curious why one would have to pay estimated taxes on a quarterly basis when theoretically, you have no way of knowing whether or not to expect a significant loss towards the tail end of the year. Then it would just be an interest free loan to Uncle Sam

Is there any one out there that waits until the filing day to pay taxes, even if there is some sort of penalty? I'm thinking that depending on the person's rate of return, it might be more profitable to pay the penalty in order to have additional funds invested throughout the year??

Any thoughts??

DHOHHI · Nov 30, 2006

Quote from Optionspoet:

Just curious why one would have to pay estimated taxes on a quarterly basis when theoretically, you have no way of knowing whether or not to expect a significant loss towards the tail end of the year. Then it would just be an interest free loan to Uncle Sam

Is there any one out there that waits until the filing day to pay taxes, even if there is some sort of penalty? I'm thinking that depending on the person's rate of return, it might be more profitable to pay the penalty in order to have additional funds invested throughout the year??

Any thoughts??

I've been paying estimated taxes for over 10 years. If you choose to not pay and have tax liability you may owe not only penalties but also interest on the amount owed.

From the IRS:

Estimated Taxes

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

Who Must Pay Estimated Tax

If you had a tax liability for 2005, you may have to pay estimated tax for 2006.

General Rule
You must pay estimated tax for 2006 if both of the following apply.

1.
You expect to owe at least $1000 in tax for 2006 after subtracting your withholding and credits.
2.
You expect your withholding and credits to be less than the smaller of;
*
90% of the tax to be shown on your 2006 tax return, or
*
100% of the tax shown on your 2005 tax return. Your 2005 tax return must cover all 12 months.

GTS · Nov 30, 2006

Quote from cashmoney69:

I called my broker and asked for a check for 780.00 (last months profit), I put the check right into the bank...I never filed and kind of tax form..was I susposed to?

The act of taking the money out of the account (unless it was an IRA) has nothing to do with you owing taxes on it.

jasmine1 · Nov 30, 2006

Quote from nkhoi:

for a mere $780? relax, you are flying below the radar level.

I would agree with you, but I did get hit with a fine (once in my early 20s) for failing to include $150.00 of income I received from an odd job I had.

Getting an audit is like winning the lottery only the prize sucks.

cashmoney69 · Nov 30, 2006

As a whole, I'm down 1,300.00 this year... if I had left the 780 in there, I'd still be in the red anyway.

nkhoi · Nov 30, 2006

as long as it is not a wash sale then you should be able to claim the whole amount.

Optionspoet · Nov 30, 2006

Quote from DHOHHI:

I've been paying estimated taxes for over 10 years. If you choose to not pay and have tax liability you may owe not only penalties but also interest on the amount owed.

From the IRS...

Thanks for the reminder DHOHHI.

I've been paying the quarterly tax as well, although it is not significant as I pay most of my taxes through withholding. However, I have to admit that I've been contemplating foregoing the est. tax recently.

So much for that idea. There's 3 folks you don't want to piss off in life:

1) The IRS
2) A Scorned Woman
3) The DEVIL

In that specific order as well...

bigmoose · Nov 30, 2006

Read up on wash sale rules... you will likely need 30 days of not trading each equity over the fiscal year change over.

If you traded it on Dec 15th with a net loss, it goes on the shelf until Jan 16th.

Though you are flying close to the deck now, you might as well get tax law down and gain experience in all aspects of this profession. ... especially with your intent on trading OPM.

Free Thinker · Nov 30, 2006

Quote from Optionspoet:

Thanks for the reminder DHOHHI.

I've been paying the quarterly tax as well, although it is not significant as I pay most of my taxes through withholding. However, I have to admit that I've been contemplating foregoing the est. tax recently.

So much for that idea. There's 3 folks you don't want to piss off in life:

1) The IRS
2) A Scorned Woman
3) The DEVIL

In that specific order as well...

you are not required to pay estimated taxes. it is only a suggestion. if you dont pay it is true that there is a penalty but the penalty is only the simple interest on the money. if you can make more trading than you would pay in interest in may be better not to pay estimated taxes.