Tax Planning

[TankCommander]

This is the first time I've had to face this situation but here goes.

In the last few months, I have begun consistently earning between 40-80% per month ROI tading 15-19 FOREX pairs(I did not anticipate doing this well). Essentially, I have begun doubling my money every 2-3 months. Currrently my wife and I earn right at about $100k a year.

I would imagine these extra earning will bump up us into the next tax bracket. At this point I don't know what I don't know from a tax perspective and how best to keep uncle sugar out of my pocket. I'm already anticipating having to hire a CPA to do my taxes this year.

Does anyone have advice on how to proceed or good website references to begin researching how to begin handling this as apposed to reacting and subsequently taking lumps during the 'learning' process?

Thank you all for your help, time and consideration.

Best regards,

Terry

 

[FIREd]

A friend of mine, who is a day trader, uses exclusively his IRA money to trade. No nightmare at tax time, plus the money grows tax free. However, you can't harvest losses in a IRA.

 

[LOL!]

Why a CPA? Are you afraid of reading the IRS publications on how to do this? They can be found at www.irs.gov

 

[Grep]

A smart-assed response probably won't help, but if you just keep doing what you are doing and wait a few months, you probably won't have any remaining gains to worry about. Problem solved.

No person and no system can do what you are claiming consistently. Sooner or later, and probably sooner, you will fail.

 

[OAG]

OK, so when does the book come out? Suggested subtitle: "I am smart enough to make 100% every 2-3 months, but I cannot figure out my income taxes". Also, what does your annual income have to do with your post?

 

[TankCommander]

Never Mind

I had hoped for constructive help and instead was ridiculed. Thank you so much!

Now how exactly to I cancel my membership to this board?

 

[REWahoo]

Now how exactly to I cancel my membership to this board?

Use the "contact us" button near the bottom of this page.

 

[LOL!]

Geez. Did you expect me to cut and paste the entire IRS publication on exactly how to do this into this thread? Seriously, go read the damn publications.

 

[Martha]

You will have lots of ordinary income from the trades where you have held less than a year, or you will have losses. I suggest starting by reading this IRS pub: Publication 17 (2007), Your Federal Income Tax

If you are lucky enough to end up positive, I suggest learning more about retirement plans to put money away for the future.

 

[retire@40]

Something fishy about that first post.

If you make $100K a year and can make lots of money sitting on your ass trading over the Internet, what's the big deal with paying a few hundred bucks to a CPA to do some paperwork and tax planning for you?

If you are really that smart, you would realize in the time the CPA prepares your tax returns, you could be on the Internet making more than what he charges you.

 

[LOL!]

I didn't see anything fishy in the first post. Many folks try their hand with options or forex. They start out with small amounts of money. Suppose TankCommander is only committing $500 in capital every month. To make 40%-80% a month on that won't even pay the mortgage (or for a CPA).

I know that when I sold covered calls, I could say that with any call that expired worthless, I made an infinite return (received $500 before "paying $0" for the expired call).

Now if the OP commits $100K of capital per month, it could get interesting.

 

[haha]

I can't really understand the hostile responses either. People do succeed at unlikely endeavors. Even our board has some very unlikely life stories- like "how we lived on $25,000 per year for the last many years, and never experienced any loss of purchasing power".

He didn't say that he wouldn't hire an accountant, only that he wanted to know something about it. Isn't that what the board would counsel anyone to do?

Maybe a dollop of jealousy operating here?

Ha

 

[retire@40]

I didn't see anything fishy in the first post...Suppose TankCommander is only committing $500 in capital every month. To make 40%-80% a month on that won't even pay the mortgage (or for a CPA)...

He said he thought these extra earnings would bump him into the next tax bracket. Usually, that's another way of indicating a significant increase in income, even thought in reality it would only take one dollar to move to the next tax bracket.

I think he was just baiting us so someone would ask for his magic formula. Haven't we seen this dozens of times before here? When nobody bites, they take off to another forum.

 

[Nords]

I had hoped for constructive help and instead was ridiculed. Thank you so much!

Did you really expect sympathy with your diplomatic & sensitive approach to this question? Seeking enlightenment is one thing, but you've practically [-]bragged[/-] waved your brokerage statements in front of the faces of thousands of people who are also facing double-digit losses for the first time in over five years. Yikes.

How 'bout "Spouse and I have unexpectedly received more income this year than we ever anticipated, and we're trying to figure out the impact of a higher tax bracket on our returns. Some of this is military-pension & disability income and some of this money has come from short-term capital gains, although we realize that may not be a long-term 'problem'. We're wondering if it's worth using a CPA tax advisor or a tax service this year."

With that hypothetical question, another poster would guide you toward offsetting cap gains with cap losses. A couple other posters would tease you about them not being able to find your problem. Someone else might suggest reading a library copy of J.K. Lasser's "Your Income Tax". Another might suggest consulting the expats & active traders on Raddr's board. But I'm just speaking hypothetically.

Or you could start a social group to discuss FOREX trading. Or send a few PMs to the people you really want to consult. But of course that's difficult to do if you're not a member.

Now how exactly to I cancel my membership to this board?

Your membership refund is also worth what you've paid for it.

You could stomp off in a thin-skinned huff, or you could also consider the value of the advice that Tomcat & I (and many others) have received over the years concerning asset allocation, diversification, military benefits, and retirement lifestyle. Kinda hard to duplicate that over at Yahoo! Finance or FundVision or other typical trader's boards. And if this is your reaction to the comparatively well-behaved and well-moderated crowd here... well... good luck with that.

This board has seen more than its share of dramatic exits and I suspect the tactic has been overused. But do yourself a favor. If you're gonna stay then stay. If you're gonna leave then leave. Just don't exit through a revolving door.

 

[Grep]

I agree that it was braggadocio or baiting or both.

 

[OAG]

That is how I see it - and I really bit on the bait. If he comes back with some realistic stuff - I will try to be the first to apologize.

 

[JDARNELL]

The great thing about the internet is that you can find information on about anything you want. The bad thing is that many times what you intend your message to be when you post is not how it is received.

I have known this guy for a long time and I am sure neither bragging nor baiting was his intention. This is not his personality. The questions he tends to ask me center along basic fundamental finance questions. If you have just transfered into a more positive financial situation you may not know exactly what to ask much less how to ask it. There is the entire range of financial knowledge within the menbers on this board and assuming the worst does no one any good. .

I won't debate the merits of how he asked the question but I think the post was genuine. As for magnitude of $$ we could be only talking a few thousand $$ which for some is pocket money but for others is more money than they have ever seen. I don't know in this case.

I have told him many times that there is good information that comes from the group. I don't always agree but at the end of the day there is value in the posts or I skip it. I think I also warned him about the comments he might get about his investment choice given the general tone of the board and how I perceive the lack of understanding of how this style particularly works. But my perception could be wrong. I know I don't know about it and really have no desire to learn. But it is what it is.

Probably a little knee jerk reaction on his part to mention leaving so quick with a few posts but negative posts really didn't help the situation either. Hopefully cooler heads will prevail all the way around and people with continue to benefit from the forum.

Tomcat98