Strategy to minimize taxes due to unpaid wages?
"Can I write off the $56,000 based on demand letters? Or do I need to   finish suing him to write-off the loss? No and no. You didn't pay taxes on the money (since you didn't file tax returns...), so what are you writing off? If you didn't get the income - you didn't get the income. Nothing to write off. Individuals in the US are usually cash-based, so you don't write off income ""accrued but never received"" since you don't pay taxes on accrued income, only income you've actually received. Should I file the 2012 taxes now? Or wait until the lawsuit finishes? You should have filed by April 2013, more than a year ago. You might have asked for an extension till October 2013, more than half a year ago. Now - you're very very late, and should file your tax return ASAP. If you have some tax due - you're going to get hit with high penalties for underpaying and late filing. If the lawsuit finishes in 2014, does it apply to the 2012 taxes? Probably not, but talk to your lawyer. In any case - it is irrelevant to the question whether to file the tax return or not. If because of the lawsuit results something changes - you file an amended return."
What is a good resource to learn about options trading strategies? Options are a quite advanced investment form, and you'd do well to learn a lot about them before attempting to dive into this fairly illiquid market. Yale's online course in financial markets covers the Options Market and is a good starting point to make sure you've got all the basics. You may be familiar with most of it, but it's a decent refresher on lingo and Black-Scholes. How can I use options to establish some cash flow from long standing investments while minimizing capital gains expenses? This question seems designed to get people to talk about covered calls. Essentially, you sell call contracts: you let people buy things you already have at a price in the future, at their whim. They pay you for this option, though usually not much if the options aren't in the money. You can think of this as trading any return above the call option for a bit of extra cash.  I don't invest with taxable accounts, but there are significant tax consequences for options. Because they expire, there will be turnover in your portfolio, and up front income when you take the sell side. So if you trade in options with close expiration dates, you'll probably end up with a lot of short-term capital gains, which are treated as normal income. One strategy is to trade in broad-based stock index options, which have favorable tax treatments. Some people have abused this though to disguise normal income as capital gains, so it could go away. Obviously the easy approach is to just use a tax advantaged account for options trading. An ETF might also be able to handle the turnover on your behalf, for example VIX is a series of options on S&P500 options. A second strategy I've heard of is buying calls and puts at a given strike price. For example, if you bought Dec '13 calls and puts on SPX @ 115 today, it would cost you about $35 dollars. If the price moves more than 35 dollars away from 115 by DEC '13 (in either direction), you've made a profit. If you reflect on that for a bit, you'll see why VIX is considered a volatility index. I guess I should mention that shorting a stock and buying a put option at the market price are very similar, with the exception that your loss is limited to the price of the option.  Is there ever an instance where options investing is not speculative? The term 'speculative' is not well defined. For many people, the answer is no. It's very easy to just buy put options and wait for prices to fall, or call options and wait for prices to rise. Moreover, the second strategy above essentially gives you similar performance to a stock without paying full price. These all fall under the headline of increasing a risk portfolio rather than decreasing it, which I figure is a decent definition of speculation. On the other hand, there are ways to use options minimize risk rather than increase it. You can buy underwater options as portfolio insurance, if your portfolio drops below a certain amount, you still have the right to sell it at a higher one. And the Case-Schiller index is run in part, on the hopes that one day there might be a thriving market for real estate options (or futures). When you buy a home or lend money to someone to buy one, you could buy regional Case-Schiller options to protect you if the regional market tanks. But in all of these cases, it's required for someone else to take the opposite trade. Risk isn't reduced, it's traded around. So technically, there is a speculative element to these as well. I think the proper question here is whether speculation is present, but whether speculation can be put to good ends. Without speculators, the already very thin market for options would shrivel faster. I agree with the other posters that you will need to seek the advice of a tax attorney specializing in corporate taxation. Here is an idea to investigate: Could you sell the company, and thereby turn the profits that are taxed as ordinary income into a long-term capital gain (taxed at 15%, plus state income tax, if any)? You can determine the value of a profitable business using discounted cash flow analysis, even if you expect that the revenue stream will dry up due to product obsolescence or expiry of licensing agreements.  To avoid the capital gains taxes (especially if you live in a high-tax state like California), you could also transfer the stock to a Charitable Remainder Trust. The CRT then sells the shares to the third-party acquirer, invests the proceeds and pays you annual distributions (similar to an annuity). The flip side of a sale is that now the acquiring party will be stuck with the taxes payable on your company's profits (while being forced to amortize the purchase price over multiple years -- 15, if I recall correctly), which will factor into the valuation. However, it is likely that the acquirer has better ways to mitigate the tax impact (e.g. the acquirer is a company currently operating at a loss, and therefore can cancel out the tax liabilities from your company's profits).  One final caveat: Don't let the tax tail wag the business dog. In other words, focus your energies on extracting the maximum value from your company, rather than trying to find convoluted tax saving strategies. You might find that making an extra dollar in profits is easier than saving fifty cents in taxes. "Your real question, ""why is this not discussed more?"" is intriguing. I think the media are doing a better job bringing these things into the topics they like to ponder, just not enough, yet.  You actually produced the answer to How are long-term capital gains taxed if the gain pushes income into a new tax bracket? so you understand how it works.  I am a fan of bracket topping. e.g. A young couple should try to top off their 15% bracket by staying with Roth but then using pretax IRA/401(k) to not creep into 25% bracket.  For this discussion, 2013 numbers, a blank return (i.e. no schedule A, no other income) shows a couple with a gross $92,500 being at the 15%/25% line. It happens that $20K is exactly the sum of their standard deduction, and 2 exemptions.  The last clean Distribution of Income Data is from 2006, but since wages haven't exploded and inflation has been low, it's fair to say that from the $92,000 representing the top 20% of earners, it won't have many more than top 25% today. So, yes, this is a great opportunity for most people.  Any married couple with under that $92,500 figure can use this strategy to exploit your observation, and step up their basis each year. To littleadv objection - I imagine an older couple grossing $75K, by selling stock with $10K in LT gains just getting rid of the potential 15% bill at retirement. No trading cost if a mutual fund, just $20 or so if stocks.  The more important point, not yet mentioned - even in a low cost 401(k), a lifetime of savings results in all gains being turned in ordinary income. And the case is strong for 'deposit to the match but no no more' as this strategy would let 2/3 of us pay zero on those gains.  (To try to address the rest of your questions a bit - the strategy applies to a small sliver of people. 25% have income too high, the bottom 50% or so, have virtually no savings. Much of the 25% that remain have savings in tax sheltered accounts. With the 2013 401(k) limit of $17,500, a 40 year old couple can save $35,000. This easily suck in most of one's long term retirement savings. We can discuss demographics all day, but I think this addresses your question.) If you add any comments, I'll probably address them via edits, avoiding a long dialog below." "As the article states, traditionally, it's a majority percentage of teens and immigrants. Makes sense. My wife and I regularly volunteer with immigrants, some documented and some not, to assist in finding jobs and housing, so that still holds true.   But, add to that the newer college grads who struggle to find ANY job.   I don't have a perfect solution. I think most people pretend their agenda is the perfect solution. So if the research shows--and it does--that mandated minimum wage raise eliminates jobs, the solution lies elsewhere. As far as ""livable wage"" goes, that is partly determined by situation and partly by individual. Obviously, the individual has to be responsible for their share (frugality, minimizing debt, work ethic, etc). But what's not in their control could be helped on a situation to situation basis. What I mean is ""disadvantaged people"" needs to be defined before you can help them. If ""disadvantage people"" means ""recently graduated students"", then minimize their biggest financial burden of school loan interest rates. If it's lower-skilled workers like teens and SOME immigrants, get rid of the minimum wage and allow them to work those lower paying jobs while gaining experience. So on and so forth.   As a business owner who makes around $30/hour, I can tell you I CAN'T afford to hire help at $19/hour to do simple tasks that would make me more productive. That killed a job right there. And it prevented me from freeing up my time to focus MORE on income-generating work, so I'm poorer for it too. As someone who volunteers with immigrants, I can't tell you how happy the people I've worked with would be to have more job opportunities." So we can lower your taxes, although at a cost of say 4 million federal employees. Now the fun begins... your market is flooded with new employees, so many people applying there isn't a reason to keep you at your pay. It's 2008 again, you lost your job, your $30 an hour job now pays $17, and you're unemployed, but at least your tax bracket went down. "Well a definitive answer would require a lot of information.  Instead of posting that kind of info online, you should take a look at the instructions for Form 2210 and in particular ""Schedule AI -- Annualized Income Installment Method,"" which corrects the penalty for highly variable income.   Using this form you will likely be able to avoid the penalty, but it is hard to know for sure." So why not talk to your employer, and ask them to pay you in gold dust? Then when tax time comes, just convert some gold dust into the amount of USD in taxes you owe.   Of course, you'd have to find farmers and shoemakers and electronic stores willing to accept payment in gold dust as well... I think we are arguing the same side of the coin here from different perspectives.    Let me re-phrase what I'm saying here:  I'm arguing that wages should be higher; that business takes advantage of the social safety net to keep wages low, pushing the balance of what they should be paying off to the taxpayer.    I'm not arguing to get rid of the social safety net.  It's there for two reasons:  First, people who have no income (as per your argument).  Second, people who have *insufficient* income.  My argument is meant to address the latter.