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Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: Nelson Chang who wrote (681)	2/1/1999 9:12:00 AM
From: mod	Respond to of 1383

In years past, I skipped estimated tax payments (with the ok of my CPA) when I had better uses for the funds. You don't have to pay estimated taxes if you have a better use for the cash. You will have to pay interest (9% sounds right) on the missed payments, and it is not deductible as an expense because it is technically a "penalty", even if you file as a trader. I don't even think you get on the "bad side" with Uncle Sam, as you are paying more interest then they would be earning on the funds themselves.

To: Nelson Chang who wrote (681)	2/1/1999 9:46:00 AM
From: Spots	Respond to of 1383

The form is 1040ES. You can download it from the IRS site or print it out of any tax program. The overall rule is you estimate your income for the year and then pay quarterly, so if you have (say) 100,000 income in Jan you would compute (estimate) tax due on it then pay 1/4 of that each quarter (Due Apr 15, Jun 15, Sep 15, Jan 15). If the situation changes during the year, you're supposed to recalculate and pay the rest of the paymens on the new basis, subject to whatever you've already paid, e.g., you have a loss in May, you recalculate for June, etc, but take into account that you're ahead of schedule because of the higher payment in April. If you don't follow this schedule, you're subject to a penalty based on the number of days between when you were supposed to pay and when you did. This is supposed to keep you from using your very own money all the way up to January. Can't have that; you might do something useful with it. There's a BIG legal loophole if you have income subject to withholding: Payroll withholding isn't subject to the timing penalty, and you can make extra tax payments via withholding by filing a W4. If that's feasible, you can delay it till December (or November if it's too much for December's paycheck). Have to figure carefully, though; and update that W4 again in January <g>. Another big loophole is that you are not subject to penalty if your paid taxes (withholding + estimated) are, roughly speaking, enough to pay tax on last year's income at this year's tax rates. I say roughly because there's a percentage involved of last years (90, 100, 110% of last year's, something like that -- I can't keep up with it). So if you have a BIG increase in income over last year, you can avoid the penalty. BTW, states with income tax also generally require estimated tax payments. Heck, I wish you make payments to me ... <gg>.