Learning About Currency Trading Taxation

Before starting to trade in the Forex market, there are some basics about currency trading taxation a Forex trader should be aware of. Notwithstanding the fact whether a Forex trader is going to become a long-term investor, or whether he/she just plans to try and see how it goes, it must be mentioned that currency market provides enormous tax advantages, especially in comparison with other financial markets.

It doesn’t matter whether a forex trader focuses on forex options/futures or on the spot market – there are tax benefits for both of them. Forex options/futures traders are taxed according to the IRC 1256 contracts in which 60% of gains/losses are calculated as long-term gains/losses and 40% as short-term ones. So, the total tax rate appears to be 23% (compare this to 35% tax rate in stocks trading). Spot forex traders are taxed on the basis of IRC 988 contracts, which provide an enormous loss protection – all losses can be calculated as ordinary losses as opposed to the first 3000 US dollars.

IRC 1256 contracts are more difficult in comparison with IRC 988 contracts – the latter provides the same tax rates for the gains and losses, which makes calculations much easier. In addition, IRC 988 contracts are more favorable for counting losses, while IRC 1256 contracts are more advantageous for the gains calculations.

When deciding which tax group to choose, a forex trader should ground on the expected amount of gains and losses.

If a forex trader consults an accounting firm, they will refer him/her to IRC 988 contracts if he/she has decided to trade on the spot forex market and to IRC 1256 contracts if he/she has chosen to be a futures/options forex trader. The key thing to keep in mind is that it is impossible to change from to IRC 988 contracts to IRC 1256 contracts during the trading year.

It must be mentioned that certainly most of the forex traders expect their gains to exceed the losses, so they often opt for IRC 1256 contracts, since they are more beneficial to gains.

What is important to keep in mind when it comes to forex taxation are the deadlines for filing (it is crucial to choose your tax group before the beginning of the trading year), keeping the detailed tax records and the importance of paying taxes, actually, since some forex traders believe they can get away with it, but are eventually caught up by the IRS.

A sensible forex trader will pay close attention to taxes if he/she wants to maximize the profits and minimize the losses. Proper taxation can save great sums of money, in point of fact, so it is well worth doing.

Alexander Collins is CEO at Forexeasystems, who is chief developer of forex trading strategy ProFx and creator of free metatrader prugin Fx Pulse that shows accurate forecasts and historical data from Forex news, etc.

The Cheapest Place to Live in the U.S.

The United States of America is large in size and rich in diversity, so finding the cheapest place to live in the US may be easier said than done.

Perhaps you are a person who has always dreamed of living in the beautiful country side far away from loud and teeming cities: think Montana.

Maybe your dream is to buy a large, beautiful house on the cheap: think Detroit. A recent count of houses for sale found quality properties as low as $37,000.

How do you find that locality in which you wish to reside? The Internet is your best friend when determining what is important to you. There is most likely an answer online to speak to nearly every question.

Quality of life issues, such as unemployment, violent crime, median income and even more fundamentally important data are reported online. The price of a pint glass of beer: Texarkana, Arkansas, for example, charges $1.50. Allentown, Pennsylvania beats it at $1.25.

How do you make a living in your rural dream locality? Health professionals, for example, have an easy time relocating; other folks may have to use some imaginative and daring planning to find their niche.

Here again, the Internet is invaluable. Online work such as editing or blogging requires excellent grammar and imagination. Retail over the Internet can be highly successful should you recognize trends and present the right product.

If you have a green thumb, you could join a growing trend and raise organic herbs, micro sprouts, mushrooms and specialty greens for restaurants and the public.

The best places to live are a highly subjective matter depending on each person. It can be a scary proposition, leaving a familiar place you’ve grown weary of, and stepping into the vast unknown. It takes imagination and nerve, but should you succeed, you will have accomplished something wonderful and courageous indeed.

Does Bankruptcy Erase Tax Debt?

The personal bankruptcy process is a way for those experiencing severe financial difficulties to wipe their debts and start again.  But does bankruptcy erase tax debt?

Some may be surprised by the fact that while filing for bankruptcy does not wipe out federal housing or education loans, it does erase tax debt, providing that certain conditions are met.  As well as having filed an honest, non-fraudulent tax return and not intentionally attempting to evade paying your taxes, there are three other criteria that must be met in order for taxes to be considered eligible for discharge.

•    3 years must have passed from the date the taxes were due to the date of petition filing.
•    2 years must have passed from the date the taxes were filed to the date of petition filing.
•    240 days must have passed from the date the taxes were assessed to the date of petition filing.

If these conditions are met, your IRS, state, and local taxes may be discharged under Chapter 7 of the U.S. Bankruptcy Code.  However, it is important to note that if the federal government has placed a lien against your property due to unpaid taxes, those taxes cannot be discharged.

Chapter 13 operates slightly differently as taxes are considered a priority and are listed at the top of the list of creditors to be repaid as part of your 3-5 year plan.  However, if your situation meets the 3 year and 240 day criteria, the judge may reduce the amount of tax you owe.  In addition, if the value of your assets or property has dropped below that of the lien against them, then the lien will be reduced to reflect that reduction in value.

Does going bankrupt erase tax debts?

Yes.  As long as you meet the criteria and file for personal bankruptcy protection under Chapter 7.

3 Ways in which you can accelerate debt reduction

If you are under severe debts and do not know what to do, then you should understand that debt reduction should be your primary focus. This is because debt reduction can help you reduce stress and levels and leaves you with more cash that you can save or utilize in investments to make money.

Some of the ways in which you can reduce your debts and also make sure that you save are as follows.

  1. Plan a budget to manage finances: It is most essential for you to formulate a budget that you can use by which you can assess your financial condition. The budget that you formulate should list all your expenses and also your monthly income. It should have categories to tell you how much you spend and where you spend it. This helps you in getting a clear picture of your finances and also makes you aware about where you are spending and how much you are spending. You must also make provisions in your budget so that you can save a certain amount every month. You must subtract the total expenses from the total income and the amount that you get is to be used to pay off your debts. If you feel that this amount is not sufficient, then you must try to reduce your expenses or increase your income. The budget keeps you motivated and helps in debt reduction as well as savings.
  2. Do not spend on what you do not need: It is important for you to know that when you are paying off your debts you are to try and spend as less as possible. This is to be done so that you can save enough to pay off your debts. Every month make a list of the things that you really need and buy only those things. Things that you desire but do not need must be avoided. The best way to refrain yourself form making such purchases is to wait. If you want to buy something that is very expensive wait for a few days to make the purchase. You will gradually realize that the desire to possess it has left you. This will save you a lot of money and you will be able to pay off your debts with ease. After you have finished paying your debts, if you still practice this, you will have enough left for investing and making money.
  3. Do not add up more debt: You should try not to add more debt to your existing debt. This is because when you are already paying off debts then it is best that you do not take on new debts. If you take on new debts, then you will have to pay a certain amount of money towards it. This will lead to a shortfall in the amount that you have to pay off towards your current debts. In order to avoid that and accelerate debt reduction you must not take on further debt. This will also help you save and make more money in future.

These are a few ways in which you can tread the path of debt reduction and opt for a new way life where you have enough to save and enough to invest.

Filing A Tax Extension

Need More Time to Pay Taxes? Read On!

Taxpayers that owe money on their taxes will be glad to know that they have some options if they can’t afford to pay the full tax liability immediately.

Here are 10 things the IRS would like people to know about taking more time to pay their taxes:

  1. If a taxpayer can’t pay the full amount, they should pay as much as they possibly can. Paying as much as they can now lowers the amount of penalties and interest that will be added to the amount owed.
  2. Depending on the circumstances, taxpayers might qualify for an tax extension on the amount of time they have to pay by making an installment agreement, delay or Offer in Compromise.
  3. If you’re unable to pay, you should write to the address or call the number that appears on your bill.
  4. You could also think about financing the payment of your taxes by getting a loan. A bank or credit company will still charge interest and fees, but will generally be less than those charged by the IRS for late payment.
  5. You could qualify for additional time to pay your taxes in full, up to 120 days. There is no fee for this arrangement, and taking this route could minimize the interest and penalties that get added on.
  6. You could also pay with a payment plan, in which you can make manageable monthly payments for a one-time $105 fee. However, if you can arrange monthly debits from a bank account, the fee drops to $52. And low-income taxpayers can get a fee of just $43.
  7. You can apply for the payment plan with the Online Payment Agreement form that can be found on the IRS website, or file a 9465 form or an payment plan request, or you can call the IRS at the number found on your IRS bill.
  8. Taxpayers might also qualify for an Offer in Compromise, which is a settlement that the IRS makes with the taxpayer making the liabilities less that what was originally owed. The offer won’t be accepted if the IRS determines that the taxes could be paid in one sum or with some kind of a payment agreement.

  9. If you do set up a payment agreement, the IRS could still file the tax lien, securing the interest of the government until your final payment is made.

  10. You should always respond to an IRS notice. If you fail to pay your taxes or make a payment arrangement, the IRS could take collection actions.

For more information, visit the IRS website at irs.gov.