Do 1256 gains require quarterly tax payments, assuming no other income

Discussion in 'Taxes and Accounting' started by trademonist, Jun 9, 2020.

  1. Sounds like your explanation is for those who qualify for and maintain "trader status". We don't know that from OP.

    And speaking of "mofo"... you qualify for your unqualified presumption!!
     
    #11     Jun 10, 2020
  2. abc1234

    abc1234

    The IRS expects you to cover 90% of your 2020 tax liability OR 100% (110% if income is high enough) of your 2019 tax liability through quarterly estimated taxes.

    Normally you cover over 90% of current year liability through payroll, however, this year you will not. The easiest thing to do is the 100/110% of prior year because you have no idea what you are going to make throughout the year. Fortunately you have until July 15 this year to figure out what you owe for Q1 and Q2.
     
    #12     Jun 10, 2020
  3. the mofo was just playful , that is why i used the word politely, I didn't mean to offend

    The assumption in the original query was that he had no other income. If he is day trading regular he should naturally apply for trader status
     
    #13     Jun 10, 2020
  4. not for 1256 contract

    and if he has no other income, he should apply for trader status and elect 475f,

    why are we going into circles?
     
    #14     Jun 10, 2020
  5. Section 1256 contracts and straddles are named for the section of the Internal Revenue Code that explains how investments like futures and options must be reported and taxed. Under the Code, Section 1256 investments are assigned a fair market value at the end of the year. If you have these types of investments, you'll report them to the IRS on Form 6781 every year, regardless of whether you actually sell them.
     
    #15     Jun 10, 2020
  6. There are requirements to qualify and ongoing requirements to maintain "trader status"... and you can't claim such status retroactively.... Logically, most who ask this question have yet to qualified as such, or they would already know. If that's the case, then their taxes get no special treatment are are required to be paid as though they were "interest". That's my point.
     
    #16     Jun 10, 2020

  7. fair enuff,

    but on a separate matter, 1256 contracts, by default, report EoY

    1256 contracts, by default, get mtm status

    1256 contracts have different tax rates
    60% long term
    40% short term
    weighted avg of 23%
     
    #17     Jun 10, 2020
  8. I don't know whether you have a point on this or not.

    Interest payments are also reported EOY on 1099, yet IRS "presumes" you know about the interest income in real-time and are required to make estimated tax payments in a "timely fashion"... ie, quarterly.

    Years ago I ran a financial planning practice for fee. No client ever asked me about this, but if one had I would had advised, "pay estimates on net gains up to quarterly tax filing date". No penalties if you do that, and if you end up paying too much in estimates, you'll get it back in a refund. I'd offer the same guidance today.
     
    Last edited: Jun 10, 2020
    #18     Jun 10, 2020
  9. abc1234

    abc1234

    You do not want to make a 475 election b/c 1256 contracts are already marked to market without it. If you make the 475 election you lose the 60/40 tax treatment. If you are profitable and expect to owe more than 1K at year end you have to make quarterly ES payments regardless.


    "Section 475 election
    Traders eligible for trader tax status (TTS) are entitled to file a timely election for Section 475 ordinary gain or loss treatment on securities and or commodities (including Section 1256 contracts). Generally, Section 475 is smart for securities traders, but not most 1256 contract traders. Ordinary losses are usually better than capital losses; however, ordinary income rates are worse than 60/40 capital gains rates."

    source:
    https://greentradertax.com/trading-futures-other-section-1256-contracts-has-tax-advantages/
     
    #19     Jun 10, 2020
  10. i had elected 475 and still reported my 1256 contracts on the 6781 form and never had a problem
    so i am not sure you lose your tax advantage of 1256

    we need to be carreful what's written on the internet especially when you just advised above we had to pay taxes quarterly
     
    #20     Jun 10, 2020