NexusFi: Find Your Edge


Home Menu

 





Senate Bill to revoke Futures 60/40 tax treatment


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one SMCJB with 9 posts (40 thanks)
    2. looks_two bobwest with 8 posts (19 thanks)
    3. looks_3 booneyall with 5 posts (13 thanks)
    4. looks_4 snax with 4 posts (11 thanks)
      Best Posters
    1. looks_one SMCJB with 4.4 thanks per post
    2. looks_two snax with 2.8 thanks per post
    3. looks_3 booneyall with 2.6 thanks per post
    4. looks_4 bobwest with 2.4 thanks per post
    1. trending_up 8,390 views
    2. thumb_up 122 thanks given
    3. group 11 followers
    1. forum 38 posts
    2. attach_file 0 attachments




 
Search this Thread

Senate Bill to revoke Futures 60/40 tax treatment

  #21 (permalink)
 
bobwest's Avatar
 bobwest 
Western Florida
Site Moderator
 
Experience: Advanced
Platform: Sierra Chart
Trading: ES, YM
Frequency: Several times daily
Duration: Minutes
Posts: 8,162 since Jan 2013
Thanks Given: 57,343
Thanks Received: 26,267


snax View Post
Regardless of being professional or non-professional, you still have to report/pay taxes on profits quarterly is that correct?

Hey, I get to use the same thing twice:

bobwest View Post
Also, I am not a tax professional, and you should always consult a qualified tax professional, and all the usual disclaimers.

Bob.

I'm pretty confident that this is the best answer.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
Reply With Quote
Thanked by:

Can you help answer these questions
from other members on NexusFi?
Online prop firm The Funded Trader (TFT) going under?
Traders Hideout
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
ZombieSqueeze
Platforms and Indicators
Futures True Range Report
The Elite Circle
Better Renko Gaps
The Elite Circle
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
Get funded firms 2023/2024 - Any recommendations or word …
60 thanks
Funded Trader platforms
37 thanks
NexusFi site changelog and issues/problem reporting
24 thanks
GFIs1 1 DAX trade per day journal
22 thanks
The Program
19 thanks
  #22 (permalink)
 
vmodus's Avatar
 vmodus 
Somewhere, Delaware, USA
 
Experience: Intermediate
Platform: MultiCharts
Broker: Barchart.com
Trading: Everything, it all tastes like chicken
Posts: 1,271 since Feb 2017
Thanks Given: 2,958
Thanks Received: 2,853


snax View Post
Regardless of being professional or non-professional, you still have to report/pay taxes on profits quarterly is that correct?

Like @bobwest, I am not a tax professional. However, I've been doing this for long enough to put my voice behind it. Since you are U.S. based, here goes...

If you have earnings that are not taxed at the point they are earned (W-2 wages, some gambling earnings, etc.), you should be paying estimated taxes on those earnings if earning more than $1,000 for the year (form 1040-ES). You do not have to report revenues, earnings, or anything else when paying estimated taxes (clarification added).

Source:

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

If you underpay, there could be a penalty, but the IRS is not draconian about such things. It is an estimated payment, after all. I paid a small penalty for underpayment once in 19 years ($16, a long time ago). The IRS wants you to get close to your actual tax liability and they want to see payments every quarter. In my case my income can vary greatly from quarter to quarter, so I adjust my quarterly payments according to my own revenue estimates. My January payment (4th payment) tries to make up for any over/underestimation.

You can read pub 505, call the IRS directly with questions, or find a tax professional. I hope this helps, @snax!

~vmodus

Enjoy everything!
Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #23 (permalink)
 
snax's Avatar
 snax 
Chicago, IL
Legendary Price Action Student
 
Experience: Beginner
Platform: Sierra Chart
Broker: Edge Clear
Trading: MES
Posts: 2,170 since Feb 2019
Thanks Given: 9,613
Thanks Received: 9,622



vmodus View Post
Like @bobwest, I am not a tax professional. However, I've been doing this for long enough to put my voice behind it. Since you are U.S. based, here goes...



If you have earnings that are not taxed at the point they are earned (W-2 wages, some gambling earnings, etc.), you should be paying estimated taxes on those earnings if earning more than $1,000 for the year (form 1040-ES). You do not have to report revenues, earnings, or anything else.



Source:


https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes



If you underpay, there could be a penalty, but the IRS is not draconian about such things. It is an estimated payment, after all. I paid a small penalty for underpayment once in 19 years ($16, a long time ago). The IRS wants you to get close to your actual tax liability and they want to see payments every quarter. In my case my income can vary greatly from quarter to quarter, so I adjust my quarterly payments according to my own revenue estimates. My January payment (4th payment) tries to make up for any over/underestimation.



You can read pub 505, call the IRS directly with questions, or find a tax professional. I hope this helps, @snax!



Hey @vmodus, this does help. I have a referral for a tax professional who is supposed to be knowledgeable in this area but I’m trying to get a bit more understanding before I contact them.

Also, I admit the thought has crossed my mind that seeking out a tax professional is somehow going to jinx any hope of becoming profitable next year.

Thanks for your help and take care!


Sent using the NexusFi mobile app

Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #24 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192


bobwest View Post
Well, this just shows that I should think more before I type.

....

Fortunately, you don't get to stay wrong for long around here. Thanks to you both for waking me up.

The reality is you were mostly right! The two big exceptions are CL and GE/ED/Eurodollars which both have 10 years of contracts. In CLs case the individual months trade out 2-3 years and the Dec contracts are liquid out 5-6 years but the last 3-4 years have very little open interest. Even Eurodollars which are highly liquid out 6-7 in all (quarterly) contracts doesn't have much OI in 8-10. NG actually goes out 12 years but is only liquid for the first 3 years. Any OI there is further out than that I think you will find was OTC Block Trades and not screen traded.

Most of the metals are listed out 5 years, but only the first 12-15 months trade. The Ags vary from 1-5 years but very little activity outside of the 1st year.

Of course when it comes to financials, Equity Index's, Currencies, Treasuries, there's very little activity outside the front month.

snax View Post
Regardless of being professional or non-professional, you still have to report/pay taxes on profits quarterly is that correct?

Not sure what the official ruling is but yes I believe you are expected to make estimated payments on any income that does not have tax deducted at source. A good rule to know though 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 can't be fined/penalized as long as you pay the balance when you file or extend before April the following year.

Started this thread Reply With Quote
Thanked by:
  #25 (permalink)
 
bobwest's Avatar
 bobwest 
Western Florida
Site Moderator
 
Experience: Advanced
Platform: Sierra Chart
Trading: ES, YM
Frequency: Several times daily
Duration: Minutes
Posts: 8,162 since Jan 2013
Thanks Given: 57,343
Thanks Received: 26,267


SMCJB View Post
The reality is you were mostly right! The two big exceptions are CL and GE/ED/Eurodollars which both have 10 years of contracts. In CLs case the individual months trade out 2-3 years and the Dec contracts are liquid out 5-6 years but the last 3-4 years have very little open interest. Even Eurodollars which are highly liquid out 6-7 in all (quarterly) contracts doesn't have much OI in 8-10. NG actually goes out 12 years but is only liquid for the first 3 years. Any OI there is further out than that I think you will find was OTC Block Trades and not screen traded.

Most of the metals are listed out 5 years, but only the first 12-15 months trade. The Ags vary from 1-5 years but very little activity outside of the 1st year.

Of course when it comes to financials, Equity Index's, Currencies, Treasuries, there's very little activity outside the front month.

Not sure what the official ruling is but yes I believe you are expected to make estimated payments on any income that does not have tax deducted at source. A good rule to know though 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 can't be fined/penalized as long as you pay the balance when you file or extend before April the following year.

Well, good to know I'm mostly right. My futures trading experience is with the equity index contracts, and I answered from that point of view. There is more to the world than my little slice of it, though.

As to paying estimated tax, I would always do that for income that had not had any withholding made, just to keep from having any big surprises at the end of the year, and to stay square with the IRS. I just didn't want to sound like I were giving advice to anyone else.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
Reply With Quote
Thanked by:
  #26 (permalink)
 booneyall 
LEXINGTON, KY
 
Experience: Intermediate
Platform: NinjaTrader 8
Broker: NinjaTrader Brokerage
Trading: MNQ
Frequency: Several times daily
Duration: Minutes
Posts: 11 since Nov 2019
Thanks Given: 24
Thanks Received: 18


snax View Post
Regardless of being professional or non-professional, you still have to report/pay taxes on profits quarterly is that correct?


Sent using the NexusFi mobile app

It would be advisable to make quarterly estimated payments on your profits but it's not "required". The 60/40 profits are combined with your other income and personal deductions so there are a number of variables to consider. If you have profits and do not make estimated payments, you may be subject to underpayment interest/penalty.

Reply With Quote
Thanked by:
  #27 (permalink)
 
vmodus's Avatar
 vmodus 
Somewhere, Delaware, USA
 
Experience: Intermediate
Platform: MultiCharts
Broker: Barchart.com
Trading: Everything, it all tastes like chicken
Posts: 1,271 since Feb 2017
Thanks Given: 2,958
Thanks Received: 2,853


booneyall View Post
It would be advisable to make quarterly estimated payments on your profits but it's not "required".

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.

~vmodus

Enjoy everything!
Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #28 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,041 since Dec 2013
Thanks Given: 4,375
Thanks Received: 10,192

@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).

Started this thread Reply With Quote
  #29 (permalink)
DmanX
New York
 
Posts: 39 since Jan 2010
Thanks Given: 38
Thanks Received: 56


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).


This is correct.


Additionally, there's other safe harbor rules besides the 100%/110*% of previous year's tax liability...

- Paying 90% (of total current year's tax bill) in Q4 (due Jan 15). If you paid at least 90% of current year's tax bill on the Q4 estimated quarterly voucher, you can pay the remaining 10% by Apr 15.

- Alternatively, you can pay 100% of tax liability by Jan 31st but then you'd be filing a full return, not a quarterly payment. You'd have your 1099 by this time but your own accounting should have already come to the same conclusion as the 1099 before you receive it giving you enough time to do a full year tax return.


*If your AGI is >150K, then it's 110% of prior year's tax liability, otherwise it's 100%.


As I'm not a tax professional, have a chat with GreenTraderTax. They will tell you the same and have better advice tailored to your specific circumstance.

Reply With Quote
  #30 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


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.

Reply With Quote




Last Updated on January 13, 2022


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts