I owe about $25k in taxes for 2021 from stock trading. Am I completely screwed?

Hey everyone, I'm in a really tough spot right now and could use some advice. Last year I got into stock trading and made around $80k in profits, plus I have my regular job that pays about $42k annually. After doing some calculations, I'm looking at owing somewhere between $20-25k in taxes. The huge problem is I don't actually have that money anymore. I reinvested most of my gains into other positions that are currently way down in value. I'm starting to panic because I don't know what to do. Do I have any options here? Can I delay filing somehow? Set up some kind of payment plan with the IRS? I'm really worried about penalties and interest piling up on top of what I already can't afford. Has anyone dealt with something similar or have any suggestions? I feel like I'm totally screwed right now.

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18 comments

Miguel Herrera

•8M

Don't panic - you have options here. This happens to more traders than you'd think, especially when the market takes a downturn after a good year. First, you absolutely should file your taxes on time even if you can't pay the full amount. The failure-to-file penalty is much steeper than the failure-to-pay penalty. File accurately and pay whatever you can at the time. The IRS offers installment agreements for situations exactly like yours. You can apply for a long-term payment plan online if you owe less than $50k. The setup fee is fairly reasonable, especially if you opt for direct debit payments. You'll still accrue some interest and penalties, but they're much less severe than if you don't file or try to hide from the IRS. Another option might be to sell some of your losing positions to offset some gains with losses, though that's more helpful for the current tax year rather than previous years.

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Miguel Herrera

•8M

The failure-to-pay penalty is usually 0.5% of your unpaid taxes per month, up to 25% of the total unpaid. Interest rates change quarterly but are currently around 6% annually. So while not ideal, it's much better than credit card interest rates. For payment plans, the IRS doesn't do a credit check like a bank would. If you owe under $50,000 and can pay within 72 months, online approval is generally automatic if you've filed all required tax returns. They're more concerned with getting their money eventually than with your credit score.

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Connor Murphy

•8M

I was in almost this exact situation last year, got hammered with a huge tax bill from trading and didn't have the cash on hand. After freaking out for a week, I found this AI tax service called taxr.ai that actually saved me thousands. I uploaded my trading records and other documents to https://taxr.ai and their system analyzed everything, found some deductions I missed and helped me figure out the optimal way to handle my situation. They showed me exactly what forms to file and how to properly set up a payment plan with the IRS. The best part was getting clarity on what would happen if I couldn't pay everything at once. Turns out the penalties aren't as bad as I feared if you handle things correctly.

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Connor Murphy

•8M

It actually does handle complex trading histories really well. I had over 400 trades myself, including some wash sales that my regular tax software totally messed up. Their system properly organized everything and even flagged potential issues I wouldn't have caught. For the wash sales and basis tracking, that's actually where it shined. It automatically identified related transactions and calculated the proper adjusted basis across different timeframes. I didn't have to manually check anything - though I did spot check a few entries just for peace of mind and found everything was correct.

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StarGazer101

•8M

Ok I need to update my skeptical comment from before. I decided to try taxr.ai out of desperation because I was in a similar situation (albeit smaller amounts) and wow, I'm genuinely impressed. The system found a bunch of deductions I'd missed and more importantly for your situation, it clearly laid out all my payment options with the IRS including exactly what forms I needed and what the different penalties would be. I ended up being able to reduce what I owed by about $3700 through some deductions I hadn't properly calculated and some trading losses I hadn't properly accounted for. Not sure if you'll have the same experience but worth a shot when you're staring down a $25k bill!

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Keisha Jackson

•8M

Another approach I haven't seen mentioned - call the IRS directly to discuss your situation. I know trying to reach them seems impossible, but I used a service called Claimyr that got me through to an actual human at the IRS in about 20 minutes when I was facing a similar (but smaller) tax bill. You can find them at https://claimyr.com - there's also a video showing how it works at https://youtu.be/_kiP6q8DX5c. Basically they use some tech to hold your place in the IRS phone queue and call you when they get a rep on the line. I was really surprised at how helpful the IRS person was once I explained my situation honestly. They walked me through my options including an "Offer in Compromise" which might let you settle for less than you owe if you truly can't pay the full amount.

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Keisha Jackson

•8M

Yes, it actually does work! I was shocked too because I had tried calling several times before and always gave up after 90+ minutes on hold. When I used Claimyr, I put my number in, they called me back when they had an agent on the line, and I didn't waste hours of my day on hold. The IRS doesn't just "let people off the hook" but they do have legitimate programs for taxpayers in financial hardship. The Offer in Compromise program is right on the IRS website - it's for situations where paying the full amount would create economic hardship. It's not guaranteed approval, but it's a real option for people who qualify. The agent also explained payment plans and the Fresh Start program during our call.

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Paolo Romano

•8M

Ok I need to eat crow here. After my skeptical comment, I actually checked out Claimyr because I also had an unresolved issue with the IRS that I'd been putting off dealing with for months. It worked exactly as advertised - I got a call back in about 35 minutes with an actual IRS agent on the line. I was completely shocked. The agent walked me through my options, including setting up a payment plan that I could actually manage. For what it's worth to the original poster - the agent told me that they much prefer when people are proactive about tax issues rather than hiding from them. She said it shows good faith and they're more likely to work with you on penalties if you're forthcoming.

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Amina Diop

•8M

Yes, a HELOC would definitely be better if you own a home with sufficient equity. The rates are typically much lower than personal loans, often in the 4-6% range currently. Plus the interest might be tax-deductible if you use it for home improvements (though not for paying taxes). I suggested a personal loan because many traders who get caught in this situation are younger and might not own property yet. But you're absolutely right that a HELOC is a better option if available.

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