When do traders have to pay the taxes - is it quarterly or annual when filing the taxes ?

Discussion in 'Taxes and Accounting' started by traderwald, Jun 8, 2020.

  1. Hi Guys,

    When do traders have to pay the taxes - is it quarterly or annual when filing the taxes ?

    Thank you
     
    murray t turtle and kmiklas like this.
  2. tm689

    tm689

    If you are self employed you normally pay your estimated taxes quarterly.
     
  3. kmiklas

    kmiklas

    Are taxes paid on realized gains within the quarter?

    If so, can the tax burden be offset by losses from a previous quarter?
     
  4. sprstpd

    sprstpd

    In the IRS's eyes, your goal is to pay the correct amount of tax each quarter. If you lose in one quarter and paid the previous, you probably should not pay any estimated tax for the loss quarter. However, you can't take back a payment you made so it is all a guess. How do you know if you are going to win or lose in the future? Just try your best and either overpay during the year or pay penalties because you didn't have a crystal ball.
     
  5. tm689

    tm689

    Basically you try to estimate your yearly profits and base your estimated tax payments on that. If you underpay you risk a penalty at year end. If you overpay you are just entitled to a refund. Some people get into the habit of overpaying their yearly average by 10% to avoid the risk of a penalty.
     
    Last edited: Jun 8, 2020
  6. If this is your first year of making big capital gains if memory serves me right there's a safe harbor provision. I would email Robert Green or pay for a hour, he's worth his weight in gold.
     
  7. There is a bit of safe harbor. I am obviously not a tax expert.

    https://www.irs.gov/taxtopics/tc306

    Basically,
    upload_2020-6-8_14-0-46.png

    So, if you wildly underpay, but pay more than 100% of last year, there should be no penalty. BUT, it probably does come with a big problem: IRS will most probably stick you with a coupon book for next year (assuming you make at least as much next year), and if you don't pay them because you make less next year, well, then I don't know. I suppose you can talk to them and explain
     
    JesseJamesFinn1 and kmiklas like this.
  8. kmiklas

    kmiklas

    I have no idea how much I'm going to make or lose, especially with all this CV volatility.

    The only thing I'm certain of is that I will be in the game. Like Lemmy said:

     
  9. tm689

    tm689

    What I was always told was that as long as you pay 10% more (in total estimated tax payments) than your prior year's tax bill you should be okay. I have done that and never had a problem.
     
  10. Bingo! I used Robert because he found some many amazing ways to legally avoid while allowing me to create a hybrid 401k, buy a new 6000 lb truck and pay my ex a salary that the 401k took off our taxes.
     
    #10     Jun 8, 2020