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Senate Bill to revoke Futures 60/40 tax treatment


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Senate Bill to revoke Futures 60/40 tax treatment

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  #31 (permalink)
 booneyall 
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SMCJB View Post
@booneyall, @vmodus, as I mentioned earlier, the exception on estimated tax payments is that as long as the tax you pay (through deductions and/or estimates) is equivalent to 110% of your previous years tax liability you won't be fined/penalized (as long as you pay the balance when you file or extend before April the following year).

It's between 90% and 110% depending on your income.

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  #32 (permalink)
 booneyall 
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ron99 View Post
I never pay estimated taxes. I just pay the small fine. It's about 3%.

I consider this a low interest loan from the government.

I started not paying when one year I made some estimated payments then the estimate payments were far too much because of losses in 4Q. The gov got to hold my money for months and I couldn't use it during that time.

That is a good consideration and is also why the answer to estimated payments are not a one size fits all. Losses in Q3 or Q4 may offset gains in Q1/Q2. Since section 1256 contracts aren't subject to self employment tax, the pressure to send them in is greatly reduced.

The Green Trader Tax guide is good; I've been in public accounting for 12 years and I use it as a reference regularly.

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  #33 (permalink)
 booneyall 
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vmodus View Post
I have to disagree with you on whether payment is required. I am not a tax professional, but I can state with certainty that if you go above that $1,000 threshold, as evidenced by a 1099 or other earnings form, you are required to make quarterly payments. This goes for just about any earnings that are not taxed, which covers a lot of types of 1099's.

Example:
  • $700 trading income (1099-B)
  • $700 Uber driving income (1099-NEC)
At $1,400, quarterly payments, even small ones, are required. The IRS may waive a penalty, but you don't want to start raising flags with them that may trigger an audit in the future.

When in doubt, just pay. It is easy to setup all your payments for a tax year in advance (EFTPS) and then adjust if needed.

I respect your opinion certainly. I suppose the definition of "required" is relative and means something different to each taxpayer. I would not classify being subject to underpayment penalty as a requirement where others may say a penalty is the consequence of a requirement violation.

In your example though, $700 on a 1099-B and $700 on an NEC are taxed differently. Broker barter transaction gains/losses are ultimately reported on Sch D and NEC payments are on Sch C where they are subject to self-employment tax. In this case the $700 Sch D income may only be taxed at a rate of 15% where the Sch C income has the 15% federal income tax and 15.3% self employment tax totaling 30%. Those with self employment income should be more concerned with quarterly payments because of the SE tax.

In 2019 I had a client who's house was about to be levied and auctioned by the IRS to offset his six figure tax liability. We were able to get the house off the chopping block by establishing a payment arrangement AND him making quarterly estimated payment's...so they are certainly important. He was a self employed contractor with a considerable SE tax factor.

I do not personally make estimated payments and pay the tax at the end of the year. The underpayment interest is worth it in order to hold the cash longer.

I appreciate the interesting discussion.

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  #34 (permalink)
 SMCJB 
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ron99 View Post
I never pay estimated taxes. I just pay the small fine. It's about 3%.

I consider this a low interest loan from the government.

I started not paying when one year I made some estimated payments then the estimated payments were far too much because of losses in 4Q. The gov got to hold my money for months and I couldn't use it during that time.

That's the situation I seem to find myself in year after year!


booneyall View Post
Since section 1256 contracts aren't subject to self employment tax, the pressure to send them in is greatly reduced.

Unless your an exchange member, then unfortunately they are!

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  #35 (permalink)
 booneyall 
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SMCJB View Post
That's the situation I seem to find myself in year after year!





Unless your an exchange member, then unfortunately they are!



Good point on the exchange members, I believe they do pay SE. Iíve never personally done a return for one but would be interested to see how that is reported.


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  #36 (permalink)
PacoDeGato
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USS Liberty View Post
I have a long December 2022 crude oil contract which I bought late last year and unless I get into a margin call, intend to hold it into next year.

Maybe you did... but it was marked to market on 12/31/2020 as far as the tax man is concerned, and repurchased on 01/01/2021.

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  #37 (permalink)
 richw 
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In my opinion, higher taxes is not a good thing. Neither is continuing to spend money we do not have nor continuing to print money. We will all most certainly pay the price for what our elected officials are doing to the economy. It is only going to get worse if we do not get some sane representatives in Congress and government. Why would we want to allow our federal government to raise taxes and continue to raise spending? Such behavior does not end well.

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  #38 (permalink)
 striveforwisdom 
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SMCJB View Post
Yesterday, August 5th, Senator Ron Wyden (D-Ore) proposed the Modernization of Derivatives Tax Act . Obviously a proposed bill isn't law (yet) but one of the things in the proposal is the elimination of the 60/40 tax break for futures.

https://www.finance.senate.gov/chairmans-news/wyden-bill-ensures-wealthy-investors-pay-fair-share-in-taxes

Thanks for sharing this!!

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  #39 (permalink)
 empty 
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ron99 View Post
I never pay estimated taxes. I just pay the small fine. It's about 3%.

I consider this a low interest loan from the government.

I started not paying when one year I made some estimated payments then the estimated payments were far too much because of losses in 4Q. The gov got to hold my money for months and I couldn't use it during that time.

Same. I have never paid. I always pay the whole thing when I file. I pay a penalty each year but it's a few hundred dollars. I've considered paying estimates at the state level because the penalties are much higher, but in the end I never do.

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