Estimated Taxes

Discussion in 'Trading' started by mjt, Jan 11, 2001.

  1. mjt


    I declared myself a trader for tax year 2000, and I have a tax liability for the 4th quarter. I have never paid estimated taxes before. I'm not looking for tax advice here, but I would appreciate finding out how some of you pay your estimated taxes if you're declared a trader.

    Do traders pay a flat 28% capital gains rate? Or is it graduated, starting at 15% and going to 39% like business owners or regular paid workers?

    Do you deduct all your expenses from your profits?

    Do you pay estimated taxes to your state, or just the IRS?

    Do you depreciate your computer and computer equipment?

    I'm trying to call the IRS, but they won't even get back to me for 3 business days. I plan to check out Green & Co.
  2. Dustin


    I also declared trader status for this year, and made my first estimated payments in Q3. You have to pay federal and state. My accountant told me that I just have to pay estimated payments on last years taxes. Basically you use last years income as a guide for this year. Then, in April you would pay the extra that you owe if you made more than last year.

    I plan on deducting computer/office equipment and my DSL charges. You can also write off any seminars, or business dinners (at the seminars?).

    We pay taxes on the gradual scale, not 28% capital gains. Also, wash sale rules do not apply to us. I am not sure how we do the paperwork. I'm letting the accountant do that.

    Please let me know of any other questions/comments. I would also like to hear what other people with trader status are doing since I am terrible with tax stuff.

  3. FYI - the only reason wash sales don't apply is if you're using mark to market accounting. Which basically means that you compute your end of year gains and losses as if any open positions at the end of the year were closed at the year end closing price. So if you had a position that was up $20,000 at the end of the year and you carried it over, you have to count the $20K gain even though you didn't sell the position.

    Not important if you're only daytrading, but if someone had some position trades or option positions open, they should be aware of the affect of MTM accounting. There's also no long term capital gain/loss for such positions when using MTM accounting. Again, no big deal for short term traders, but if you've also got some longer hold positions it might matter to you.