Just a heads up - make sure you're also considering any potential late filing penalties for these prior year 1099 NECs. The penalty ranges from $50 to $280 per form depending on how late they are and whether the IRS considers it intentional disregard. If you have a reasonable cause for filing late, include a statement explaining the circumstances. The IRS can waive penalties if you can show reasonable cause for not filing on time.

For the 1099 NEC forms, you can also check with local office supply stores like Staples or OfficeDepot - they sometimes carry prior year tax forms in stock, especially during tax season. I found 2021 forms at my local Staples last year when I was in a similar situation. Regarding penalties, if you're filing these 1099s now for 2021 and 2022, you're definitely looking at late filing penalties. However, since your contractor already reported the income on their tax returns, this works in your favor for penalty abatement. The IRS is more lenient when the income was properly reported by the recipient even if the 1099 was filed late. When you submit the forms, include a letter explaining that this is your first time filing 1099s as a small business owner, you've been working to get compliant, and the recipients have already properly reported the income. This reasonable cause explanation can help reduce or eliminate penalties. Also, double-check that you actually need to issue 1099 NECs - you only need them if you paid $600 or more to non-corporate contractors during the tax year. If your contractor was incorporated, you generally don't need to issue a 1099 NEC at all.

As a tax preparer who's seen this exact scenario play out many times, I want to emphasize something that's been touched on but deserves more attention: the IRS has gotten much more sophisticated at detecting these patterns through automated systems. What you're describing - transferring assets just under the Kiddie Tax threshold to multiple children followed by quick sales - is essentially a textbook example of what their algorithms flag for review. Even if everything is technically legal, you're setting yourself up for scrutiny that's just not worth the minimal tax savings. I've had three clients in the past two years who tried variations of this strategy. All three ended up spending more on professional fees during their audits than they saved in taxes. The IRS agents specifically mentioned that custodial account activity is one of their focus areas right now. If you're really looking to reduce your tax burden while helping your kids, consider more straightforward approaches: 529 plans (as mentioned), direct educational expense payments (which don't count against gift limits), or even just holding the investments until you qualify for long-term capital gains rates. Sometimes the most boring strategy is also the smartest one.

New member here, but this discussion has been incredibly valuable as I was considering a very similar strategy for my two kids. The warning about IRS algorithms specifically flagging custodial account patterns is exactly what I needed to hear. I'm curious about one thing that hasn't been fully addressed - for those who mentioned 529 plans as the better alternative, are there any downsides to be aware of? I know the money has to be used for qualified education expenses, but what happens if my kids decide not to go to college or get full scholarships? Also, @CosmicCruiser mentioned that direct educational expense payments don't count against gift limits - could you elaborate on how that works? Does that mean I could pay tuition directly to the school without it counting against the annual gift tax exclusion? Thanks for saving me from what would have clearly been a mistake. Sometimes the "too good to be true" strategies really are just that.

I was in a very similar situation last year - working part-time as a graphic designer while day trading. Based on my experience and research, you definitely have a strong case for TTS qualification. Your 15-20 trades per week and 4-5 hours daily commitment are well within the range that courts have recognized as "substantial" trading activity. The fact that you're generating more income from trading than your regular job actually strengthens your position. The IRS looks at factors like frequency of trades, time devoted to trading, and whether you're seeking to profit from short-term price movements rather than long-term investment gains. A few practical tips: Make sure you're keeping detailed records of your trading time (I use a simple spreadsheet), maintain separate accounts for trading vs. personal finances, and document your trading strategy/methodology. Consider setting up a dedicated trading workspace at home if you haven't already - this can support home office deductions. One thing to be aware of: if you decide to elect mark-to-market accounting, you need to make that election by the tax filing deadline (including extensions) for the year you want it to take effect. So if you're planning to claim TTS for 2024, you'd need to make the MTM election by the 2024 tax filing deadline. Your situation sounds very promising for TTS qualification. The key is proper documentation and maintaining clear separation between your trading business and employment.

Based on your trading activity and time commitment, you have a solid foundation for TTS qualification. The IRS doesn't require full-time trading - they focus on whether your activity constitutes a "trade or business" based on frequency, regularity, and substantiality. Your 15-20 weekly trades and 4-5 daily hours of trading work strongly support TTS eligibility. What's particularly compelling is that your trading income exceeds your part-time job income, which demonstrates the business nature of your activity. Here are some key steps to strengthen your position: 1) **Documentation is critical** - Keep detailed logs of time spent trading, researching, and managing positions. This shows the IRS you're running a legitimate business operation. 2) **Separate your activities** - Use dedicated accounts, equipment, and workspace for trading. This creates clear business separation from your employment. 3) **Business approach** - Maintain a formal trading plan, strategy documentation, and treat it like the business it is. 4) **Consider professional help** - Given the complexity of TTS rules and the potential tax benefits (especially with mark-to-market election), consulting with a CPA experienced in trader taxation could save you significant money and audit headaches. The part-time employment actually works in your favor by showing you have another income source, making it clear your trading isn't just casual investing but a separate business activity. Many successful TTS claims have been made by people with other jobs - the key is demonstrating the substantial, regular, continuous nature of your trading business.

As someone who's been through this exact situation with SPX and SPY options, I can definitely relate to the confusion around Form 6781! One thing that helped me was creating a spreadsheet to track all my positions before trying to fill out the form. For each trade, I documented: the underlying security, option type (call/put), strike price, expiration date, entry/exit dates, and whether it was part of an offsetting position. This made it much easier to identify which trades actually formed straddles versus just standalone option positions. Also worth noting - if you have any positions that were still open at year-end that offset realized losses, you may need to report unrecognized gains under the straddle rules. This is one of the trickier parts of Form 6781 that catches a lot of people off guard. The key is being methodical about it rather than trying to rush through. Take your time to properly categorize each position first, then tackle the form section by section.

I went through this exact same situation last year with my SPX and SPY options trading! The confusion around Form 6781 is totally understandable - it's one of the more complex tax forms out there. One thing that really helped me was understanding the timing differences. For SPX options (Section 1256 contracts), you have to mark-to-market at year end even if you're still holding the positions. This means you'll report gains/losses on all your SPX positions in Part I whether you closed them or not. For SPY options that form straddles, you only report realized transactions in Part II, but you need to be careful about the loss deferral rules. If you realized a loss on one leg of a straddle while the offsetting position had unrecognized gains, you may have to defer some of that loss. I'd also suggest keeping very detailed records of when you opened and closed each position. The IRS can be pretty strict about the documentation for straddle transactions, especially if they audit. Make sure you can clearly show which positions were intended to offset each other and when those relationships were established. The good news is once you get through it the first time, subsequent years become much easier since you'll understand the process better!

Does anyone know if its possible to just mail a check for quarterly payments? My internet is spotty and I dont really trust online payments for something this important.

I've been using FreeTaxUSA for my quarterly payments for about 2 years now and wanted to share my experience. The software does a great job calculating your estimated payments, but like others mentioned, you need to handle the actual payment process separately. I started with Direct Pay but switched to EFTPS after missing a payment deadline (cost me about $65 in penalties). The EFTPS registration process is a bit old-school - you do have to wait for them to mail you a PIN - but once you're set up, it's incredibly convenient to schedule all four payments at once. One tip that might help: when FreeTaxUSA calculates your quarterly amounts, print out that summary page and keep it with your tax records. I reference it throughout the year when I'm tracking my business income to make sure I'm still on track. Also, don't forget that if your income changes significantly during the year, you might need to adjust your remaining quarterly payments. EFTPS makes it easy to modify future scheduled payments if needed.