How much tax will I pay if my income for 05' is 20k and after loss and gains I made another 20k in stocks.

Question

do I pay taxes on losses? As I am understanding my broker is taking all my transactions and adding them up, which comes out to be well over 100k and in reality is the same money. I started trading with 4k from my savings and is now close to 20k after about 50 trades this year. Its killing me not to know how much I will end up paying in taxes, I am starting to regret getting in to the market. Please enlighten me with knowledge

Answer 1

Am working on assumption all your stock trades will be short (held less than one year) so the gain will be taxed at your normal rate as only long term gains receive lower rates. If you started with 4K and how have 20K you have a gain of 16K. Take that l6 plus your 20 earnings for a total of 36,000. single subtract 5,100 standard deduction and 3,250 for your own exemption and you have a total taxable income of 27,650 for a total federal income tax due of $ 3,786.00. Check your pay stub for fit withheld to date and see if you have to increase your withholding in order to not come out short at the end of the year.

Answer 2

You are asking this question after the tax deadline for 2005 has passed. From what you say, it appears you already owe the IRS tax, interest, late filing penalty and late payment penalty, the last three of which are going to increase as each month goes by.

The best thing you can do is gather up your W-2, 1099's and brokerage statements then get to a CPA who will help you file. If you filed in 2004 you should certainly take that return as well as it may mitigate late payment penalties. Do it as soon as possible. From what you say, you started trading fairly recently so I expect the brokerage statements will give your accountant the chance to reconstruct your records, although this will cost money. If your broker is co-operative, it may be easier for the accountant to get a statement from them (unless you are using a very small broker who lacks the necessary software to track such things automatically).

You are going to pay a few hundred dollars in accountant's fees (at least I hope it will just be in the hundreds - depends on how many trades you did) but it is nothing compared to the penalties that will accrue if you do nothing.

You have had a bad start with this venture in terms of record-keeping. It is vital that you know where you stand on a regular basis - at least quarterly. Seek advice from your new accountant. They will suggest ways you can help yourself, based on how they work. Providing the information at the end of the year will be much easier if you keep your records updated throughout the year. The accountant may even offer to do that for you, for an additional fee.

When you choose an accountant, I would suggest going to a CPA or an Enrolled Agent. The chain tax prep companies, so far as I am aware, do not offer the extended service you may wish for going forward.

Good luck and GET TO AN ACCOUNTANT TODAY!