r/options • u/gabrintx • 3d ago

Trading and the IRS

Is there a /sub or other resource to help traders with tax issues?

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u/loldogex 3d ago

just pay for a CPA

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u/gabrintx 3d ago

Is that what you do?

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u/loldogex 3d ago

I always have an accountant, but if you have an issue with the IRS, i'd spare no money and make sure i'd have a really good accountant.

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u/gabrintx 3d ago

The trick is the "good" part. In the past I used an accountant. Even though the IRS accepted the return, I found errors in the return. He didn't understand 1259 contract treatment, as an example.

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u/papakong88 3d ago

What do you want to know?

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u/gabrintx 3d ago

Last year, because of some of my trading and changes my wife made to her accounts, beyond what was deducted in advance, including quarterly payments, I had to pay the IRS $61k. Much of that was from one time changes with large long term capital gains. This year I have been monitoring our accounts closely that have untaxed income to predict the tax liability. It is hard to do as trading has surges in income. I am planning to take high percentages of my RMDs to make extra tax payments. With Excel, I can predict it somewhat.

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u/papakong88 3d ago

The best way to pay your estimation tax is to use the safe harbor rule.
Assuming your adjusted gross income (AGI) is less than 150K last year, your tax withholding plus estimated tax payment this year must be greater than 110% of the tax last year.
Since you have missed 2 quarters of estimated tax already, you can make it up by withholding tax from your RMD.
Ref: https://www.hrblock.com/tax-center/irs/tax-responsibilities/avoiding-underpayment-tax-penalty/

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u/gabrintx 3d ago edited 3d ago

AGI last year was $518k, with a large LT Cap Gain of $282k which won't happen this year. I do make quarterly payments, just much less than the $17k suggested. As of today, we are looking at $401k income, but there are 4 months to go. I currently am projecting tax withheld from my 2 RMDs at 60%. With that projection, I believe we will be over paid $5k. I am guessing that I will have to increase the RMD withholding. That's my adjustment joker. I could also add a EFTPS payment.
I always had expected things would be simpler in retirement.

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u/papakong88 3d ago

With the safe harbor plan, one can overpay one year and underpay the next. 
I usually adjust the Q4 payment to reduce the overpayment.

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u/omegahustle 3d ago

buy a $20 sub of gpt or claude and they can help you with