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Taxes and You

As someone who got fucked over by them, I wanted to do this writeup to help others understand how they work and what to lookout for.

Why are you doing this now?:

The first thing you need to understand is that the IRS sees your taxes on a per-year basis. When you see all those tax forms asking you lived in a state until Dec. 31st? Yep, that's the cutoff. They don't give a shit about anything that happens after that when it's time to file. That means that your gains at that time are all that matter. If you made $100k (realized) between Jan and Dec 31st and your wife says you need to invest into her CBD oil shenanigans and it goes tits up this January – The IRS only sees you made $100k and you are 💯% fucked. I have read horror stories like this about people who made tens of thousands in one year and then have to file bankruptcy because they YOLOed it all in Spring and lost. I am not even going to cover wash sales here. Just know if you make money, the government wants to fuck you.

Short-term gains vs. long-term gains vs. loss:

ALL of your gains become ordinary income. Your income tax bracket will be gains + salary. I'm going to use high-estimates here but feel free to Please check these brackets for yourself. Expect 37% for your short-term gains and 20% for your long term gains. If you only have losses, you don't have to worry about any of this.

I made plenty, why should I care?:

Because if you have made plenty and already know you are going to pay plenty; this allows you to take on perhaps a more risky move later in the year, because every dollar you are positive the government is going to snatch $0.37 of.

You also need to consider your method of payment come tax time. I was caught with my trousers down not because I had squandered my gains; but because I had invested them. Once May came around, turbotax is telling me I owe $20k and have a week to pay it. Which would not be a problem had I set this money aside from the start. But why would I? The dollar is a depreciating asset. Not a chance I was going to let that cash sit in purchasing power. I put it into shares that I could hold for at least a year because I fucking hate taxes! I was willing to do anything that would prevent me from having to withdraw those shares and pay….MORE short-term gains taxes!

Payment methods:

Yes the IRS does offer payment plans, but they are all through third parties and there isn't too much wiggle room, the further you extend it the worst your interest rate gets. This is where some advanced traders game the system more. A +$10k unavoidable bill some will just open a new credit line, accept all the rewards that come with it and a low APR and slowly work it down.

For me, I contacted my CC Provider (Discover) and told them straight up that I did not wish to manage another line of credit and asked if they would raise my limit to cover the bill. I have a good credit score and history with them. I also asked them for a few months to pay it off and I wanted 0.0% APR. They gave me a whole year at 0.0%. It is not them just being nice, it is because if I did not finish paying that debt off in a year, my APR would jump to 25% and things can go downhill very quickly.

Roth account:

If you do not have this already, get it now. You need to be maxing this out every fucking year. This is not your Robinhood where every positive cent you make the government gets part of. The shares (and options 😉) you purchase in this bad boy are tax fucking free.

Who are you?

I was poor, then I wasn't and then I found out about taxes. Thanks for coming to my Ted Talk.

TL;DR:

If you lost money this year ignore everything but Roth. If you made money this year, get ready to be paying 20% minimum come May, and don't do stupid shit and lose it all by then.

submitted by /u/Captain_Yolo_
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