query: What are the consequences of IRS “reclassification” on both employer and employee?

positive: "You are confusing entirely unrelated things. First the ""profit distribution"" issue with Bob's S-Corp which is in fact tax evasion and will probably trigger a very nasty audit. Generally, if you're the sole employee of your own S-Corp, and the whole S-Corp income is from your own personal services, as defined by the IRS - there's no profit there. All the net income from such a S-Corp is subject to SE tax, either through payroll or through your K-1. Claiming anything else would be lying and IRS is notorious for going after people doing that. Second - the reclassification issue. The reason employers classify employees as contractors is to avoid payroll taxes (which the IRS gets through Bob's S-Corp, so it doesn't care) and providing benefits (that is Bob's problem, not the IRS). So in the scenario above, the IRS wouldn't care whose employee Bob is since Bob's S-Corp would have to pay all the same payroll taxes. The reclassification is an issue when employees are abused. See examples of Fedex drivers, where they're classified as contractors and are not getting any benefits, spend their own money on the truck and maintenance, etc. The employees are the ones who sued for reclassification, but in this case the IRS would be interested as well since a huge chunk of payroll taxes was not paid (driver's net is after car maintenance and payments, not before as it would be if he was salaried). So in your scenario reclassification is not as much a concern to Bob as his tax evasion scheme claiming earnings from performing personal services as ""profits from S-Corp"". A precedent to look at, as I mentioned elsewhere, would be the Watson v Commissioner case."

negative: "Well, as you say, the instructions for form W-2 (for your employer to fill out) say You must report all employer contributions (including   an employee's contributions through a cafeteria plan) to   an HSA in box 12 of Form W-2 with code W. Employer   contributions to an HSA that are not excludable from the   income of the employee also must be reported in boxes 1,   3, and 5. However, while it's your employer's job to fill out W-2 correctly, it's only your job to file your taxes correctly. Especially as you say your box 1/3/5 income is correct, this isn't too hard to do. You should file Form 8889 with your return and report the contributions on Line 9 as Employer Contributions. (And as you say, both what the employer contributed outright and what you had deducted from your pay are both Employer Contributions.) Be sure to keep your final pay stub for the year (or other documentation) showing that your employer did contribute that amount, just in case the IRS does end up questioning it for some reason.  If you really want to, you could try calling the IRS and letting them know that you have contributions that weren't reported on your W-2 to see if they want to follow up with your employer about correcting their documentation, if your efforts have been fruitless. There's even a FAQ page on the IRS site about how to contact them when your employer isn't giving you a correct W-2 and how to fill out a Form 4852 instead of using the W-2, which I'd recommend if the amount of income listed was wrong or if there were some other more ""major"" problem with the form. Most likely, though, since it's not going to affect the amount of tax anybody will pay, it's not going to be at the top of their list. I would worry more filling out the forms you need to fill out correctly rather than worrying about the forms your employer isn't filling out correctly."

negative: In the USA, you probably owe Self Employment Tax. The cutoff for tax on this is 400$. You will need to file a tax return and cover the medicaid expenses as if you were both the employer and employee.  In addition, if he earns income from self-employment, he may owe Self-Employment Tax, which means paying both the employee’s and employer's share of Social Security and Medicaid taxes. The trigger for Self Employment Tax has been $400 since 1990, but the IRS may change that in the future. Also see the IRS website.  So yes, you need to file your taxes. How much you will pay is determined by exactly how much your income is.  If you don't file, you probably won't be audited, however you are breaking the law and should be aware of the consequences.

negative: "It seems I can make contributions as employee-elective, employer   match, or profit sharing; yet they all end up in the same 401k from my   money since I'm both the employer and employee in this situation. Correct. What does this mean for my allowed limits for each of the 3 types of   contributions? Are all 3 types deductible? ""Deductible""? Nothing is deductible. First you need to calculate your ""compensation"". According to the IRS, it is this: compensation is your “earned income,” which is defined as net earnings   from self-employment after deducting both: So assuming (numbers for example, not real numbers) your business netted $30, and $500 is the SE tax (half). You contributed $17.5 (max) for yourself. Your compensation is thus 30-17.5-0.5=12. Your business can contribute up to 25% of that on your behalf, i.e.: $4K. Total that you can contribute in such a scenario is $21.5K. Whatever is contributed to a regular 401k is deferred, i.e.: excluded from income for the current year and taxed when you withdraw it from 401k (not ""deducted"" - deferred)."

negative: "I agree that you should have received both a 1099 and a W2 from your employer. They may be reluctant to do that because some people believe that could trigger an IRS audit. The reason is that independent contractor vs employee is supposed to be defined by your job function, not by your choice. If you were a contractor and then switched to be an employee without changing your job description, then the IRS could claim that you should have always been an employee the entire time, and so should every one of the other contractors that work for that company with a similar job function. It's a hornet's nest that the employer may not want to poke. But that's not your problem; what should you do about it? When you say ""he added my Federal and FICA W/H together"", do you mean that total appears in box 4 of your 1099? If so, it sounds like the employer is expecting you to re-pay the employer portion of FICA. Can you ask them if they actually paid it? If they did, then I don't see them having a choice but to issue a W2, since the IRS would be expecting one. If they didn't pay your FICA, then the amount this will cost you is 7.65% of what would have been your W2 wages. IMHO it would be reasonable for you to request that they send you a check for that extra amount. Note: even though that amount will be less than $600 and you won't receive a 1099 in 2017 for it, legally you'll still have to pay tax on that amount so I think a good estimate would be to call it 10% instead. Depending on your personality and your relationship with the employer, if they choose not to ""make you whole"", you could threaten to fill out form SS-8. Additional Info: (Thank you Bobson for bringing this up.) The situation you find yourself in is similar to the concept of ""Contract-to-Hire"". You start off as a contractor, and later convert to an employee. In order to avoid issuing a 1099 and W2 to the same person in a single tax year, companies typically utilize one of the following strategies: Your particular situation is closest to situation 2, but the reverse. Instead of retroactively calling you a W2 employee the entire time, your employer is cheating and attempting to classify you as a 1099 contractor the entire time. This is frowned upon by the IRS, as well as the employee since as you discovered it costs you more money in the form of employer FICA. From your description it sounds like your employer was trying to do you a favor and didn't quite follow through with it. What they should have done was never switch you to W2 in the first place (if you really should have been a contractor), or they should have done the conversion properly without stringing you along."

negative: Companies are required BY THE IRS to try to get everybody to contribute minimal amounts to the 401K's.  In the past, there were abuses and only the execs could contribute and the low paid workers were starving while the execs contributed huge amounts.   On a year-by-year basis, if the low-paid employees don't contribute, the IRS punishes the high paid employees.  Therefore, most employers provide a matching program to incentivize low-paid employees to contribute. This 9% limitation could happen in any year and it could have happened even before you got your pay raise, what matters is what the low-paid employees were doing at your company LAST YEAR.

negative: "In almost all cases, gifts from employers are considered taxable compensation, based on the employer-employee nature of the relationship. Furthermore, cash gifts are always considered to be intended as wages, regardless of how you receive the money. Furthermore, regardless of whether you expect to receive anything in return (such as contractual consideration) or whether the amounts are large enough to be declared as taxable personal gifts, it is likely that the IRS would consider these payments to be ""disguised wages"", as these payments would fail several tests that the IRS uses to determine whether benefits provided by the employer are non-taxable, including: I'd recommend reviewing IRS publication 535 here, as well as publication 15-B here for more on what constitutes taxable wages & benefits. It seems very unlikely to me that you could make a persuasive legal defense in which you claimed to be working full-time for $60.00 per year and just happened to be receiving large personal gifts of $130,000.00. In my opinion it seems much more likely that these payments would be found to be taxable wages for services rendered."

negative: "The standard is actually 30 hours a week over a given period of time (3-12 months of the previous taxable year).   The interesting problem for the prototypical employer who wants to offer benefits to as few employees as possible is ERISA Sec. 510. According to the above poster, companies want to avoid hiring full time positions. However, based on employer needs, only hiring part time workers will not be feasible for many businesses. Furthermore, if employers restrict hours for the purpose of denying access to benefits, they may be violating ERISA Sec. 510, which would lead to a major lawsuit for that business. As ERISA is an opt-in class action statute, as well as a generous attorney fee statute (it's easier for plaintiff's lawyers to make the defense pay their legal fees, see ERISA 502(g), CIGNA v. Amara), it would be unwise for employers to simply refuse to hire any more full time employees.  Of course, companies will be looking to avoid ""overpaying"" for benefits in any way they can. But simplistic conclusions, such as vexu gave, that they will not hire full time workers fails to grasp both the complexity of PPACA and the consequences of a given employer's actions."

negative: Congratulations on your raise! Is my employer allowed to impose their own limit on my contributions   that's different from the IRS limit? No. Is it something they can limit at will, or are they required to allow   me to contribute up to the IRS limit? The employer cannot limit you, you can contribute up to the IRS limit. Your mistake is in thinking that the IRS limit is 17K for everyone. That is not so. You're affected by the HCE rules (Highly Compensated Employees). These rules define certain employees as HCE (if their salary is significantly higher than that of the rest of the employees), and limit the ability of the HCE's to deposit money into 401k, based on the deposits made by the rest of the employees. Basically it means that while the overall maximum is indeed 17K, your personal (and other HCE's in your company) is lowered down because those who are not HCE's in the company don't deposit to 401k enough. You can read more details and technical explanation about the HCE rules in this article and in this blog post.

negative: "I'm not a tax lawyer, but from what I can tell it looks like you'd be eligible to use your contractor income to fund a Solo 401(k).  http://www.irafinancialgroup.com/whatissolo401k.php ""To access these benefits an investor must meet two eligibility requirements: The presence of self employment activity. The absence of full-time employees."" And from the IRS itself (http://www.irs.gov/pub/irs-tege/forum08_401k.pdf)"

negative: "You should be aware that the IRS considers all gifts of cash or cash equivalents from an employer (the partnership in this case) to an employee (your husband in this case) to be wages, regardless of what the transfer is called by either party, or how it is transferred. I'd strongly recommend that you review IRS publications 535 and 15-B, which are linked in my response to the question that littleadv referred to above. I would also recommend speaking with a lawyer, as in this case, you have knowledge of the income and would not be able to claim an ""innocent spouse"" provision if he is convicted of tax evasion/fraud. Good luck."

negative: Forms 1099 and W2 are mutually exclusive. Employers file both, not the employees. 1099 is filed for contractors, W2 is filed for employees. These terms are defined in the tax code, and you may very well be employee, even though your employer pays you as a contractor and issues 1099. You may complain to the IRS if this is the case, and have them explain the difference to the employer (at the employer's expense, through fines and penalties). Employers usually do this to avoid providing benefits (and by the way also avoid paying payroll taxes). If you're working as a contractor, lets check your follow-up questions: where do i pay my taxes on my hourly that means does the IRS have a   payment center for the tax i pay. If you're an independent contractor (1099), you're supposed to pay your own taxes on a quarterly basis using the form 1040-ES. Check this page for more information on your quarterly payments and follow the links. If you're a salaried employee elsewhere (i.e.: receive W2, from a different employer), then instead of doing the quarterly estimates you can adjust your salary withholding at that other place of work to cover for your additional income. To do that you submit an updated form W4 there, check with the payroll department on details. Is this a hobby tax No such thing, hobby income is taxed as ordinary income. The difference is that hobby cannot be at loss, while regular business activity can. If you're a contractor, it is likely that you're not working at loss, so it is irrelevant. what tax do i pay the city? does this require a sole proprietor   license? This really depends on your local laws and the type of work you're doing and where you're doing it. Most likely, if you're working from your employer's office, you don't need any business license from the city (unless you have to be licensed to do the job). If you're working from home, you might need a license, check with the local government. These are very general answers to very general questions. You should seek a proper advice from a licensed tax adviser (EA/CPA licensed in your state) for your specific case.

negative: "If they directly paid for your education, it is possible that it wouldn't count as taxable income to you according to the IRS, depending on the amount: If you receive educational assistance benefits from your employer   under an educational assistance program, you can exclude up to $5,250   of those benefits each year. This means your employer should not   include those benefits with your wages, tips, and other compensation   shown in box 1 of your Form W-2. This also means that you do not have   to include the benefits on your income tax return. source: http://www.irs.gov/publications/p970/ch11.html However, your situation is a bit trickier since they are sort of retroactively paying for your education. I'd think the answer is ""Maybe"" and you should consult a tax professional since it is a gray area.  Update: On further research, I'm going to downgrade that ""Maybe"" to ""Probably not, but hopefully soon."" The reason I am doing so is that there is a bill in Congress specifically to allow what you are asking, which presumes that you currently can't do this.  The Bill is HR Bill 395 ""The Student Loan Employment Benefits Act of 2013"" sponsored by rep Steve Israel (D). It has co-sponsors from both parties, so that is promising for it's passage, I suppose. However, it appears to be still early in the legislative process. If this issue is near/dear to your heart maybe you should call your congressman. Summary of the Bill: (from govtrack.us) Student Loan Employment Benefits Act of 2013 - Amends the Internal   Revenue Code to exclude from the gross income of an employee amounts   paid by an employer under a student loan payment assistance program.   Limits the amount of such exclusion to $5,000 in a taxable year. Requires an employer student loan payment assistance program to be a   separate written plan of an employer to provide employees with student   loan payment assistance.  Defines ""student loan payment assistance"" as   the payment of principal or interest on any indebtedness incurred by   an employee solely to pay qualified higher education expenses which   are paid or incurred within a reasonable time before or after such   indebtedness was incurred and are attributable to education furnished   during a period in which such employee was a student eligible for   federal financial assistance."

negative: IRS Publication 969 gives all the details about HSA accounts and High Deductible plans: According to your question you are covered by a plan that can have an HSA.  There a few points of interest for you: Contributions to an HSA Any eligible individual can contribute to an HSA. For an employee's   HSA, the employee, the employee's employer, or both may contribute to   the employee's HSA in the same year. For an HSA established by a   self-employed (or unemployed) individual, the individual can   contribute. Family members or any other person may also make   contributions on behalf of an eligible individual. Contributions to an HSA must be made in cash. Contributions of stock   or property are not allowed. That means that yes you could make a contribution to the HSA. Or if in the future you were the provider of the insurance you could have a HSA. Limit on Contributions  For 2015, if you have self-only HDHP coverage, you can contribute up   to $3,350. If you have family HDHP coverage you can contribute up to   $6,650. It sounds like you have a family plan. Additional contribution.   If you are an eligible individual who is   age 55 or older at the end of your tax year, your contribution limit   is increased by $1,000. Rules for married people.   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. If   each spouse has family coverage under a separate plan, the   contribution limit for 2014 is $6,550. You must reduce the limit on   contributions, before taking into account any additional   contributions, by the amount contributed to both spouses' Archer MSAs.   After that reduction, the contribution limit is split equally between   the spouses unless you agree on a different division. The rules for married people apply only if both spouses are eligible   individuals. If both spouses are 55 or older and not enrolled in Medicare, each   spouse's contribution limit is increased by the additional   contribution. If both spouses meet the age requirement, the total   contributions under family coverage cannot be more than $8,550. Each   spouse must make the additional contribution to his or her own HSA. Note: most of the document was written with 2014 numbers, but sometimes they mention 2015 numbers. If both are covered under a single plan it should be funded by the person that has the plan. They may get money from their employer. They may be able to have the employer cover the monthly fee that most HSA administrators charge. The non employee can make contributions to the account but care must be taken to make ure the annual limits aren't exceeded. HSA contributions from the employees paycheck may reduce the social security tax paid by the employee. If the non-employee is self employed you will have to see how the contribution impacts the social security situation for the couple. If the non-employee is 55 or older it can make sense to throw in that extra $1000. The employer may not allow it to come from the paycheck contributions because they wouldn't necessarily know the age of the spouse, they may put a maximum limit based on the age of the employee.

negative: "I highly doubt this was a mistake. In the event of a corporate merger/buyout, changes to employee 401(k) plans are usually hashed out as part of the M&A agreement. The choices made in the agreement depend on numerous factors, so it may be difficult to predict what happens to your plan in situations like this. A quick online search reveals a few articles, e.g. this one from expertplan.com, that list the three most common consequences for retirement plans: It sounds like the company that purchased your employer agreed to immediately vest employees in employer 401(k) contributions as part of the purchase agreement. Without knowing the details of the merger/buyout, I can't say this for sure, but this sounds like a plausible way to keep employees of the purchased company content.  Rather than roll it over, does it make sense to wait for that company to be purchased, in the hopes that a similar ""mistake"" occurs? Since this doesn't sound like a mistake, but rather a part of the buyout agreement, I don't think it's something you should count on in the future. It may be very likely, or it could be a relatively rare occurrence that happened to be part of this purchase agreement. I don't believe the Employee Retirement Income Security Act regulates what can or can't be done to your 401(k) in a buyout, except that the company is required to inform you of any changes (and obviously, the new 401(k) plan must conform to ERISA as well)."

negative: "There are a lot of unintended consequences of fairly arbitrary IRS guidelines when it comes to 401Ks, they both close and create tons of loopholes and many companies are left to implement their own policy around these laws. Ultimately what you are left with are a lot of random things, interpreted differently by every single company in the country, that aren't directly codified by the IRS or Congress. If you have a choice regarding what brokerage firm manages your 401(k), then just call around. Be sure to ask the pencil pusher on the phone to double check because they might say ""OF COURSE you can get paperless statements it is 2015"" but then when you sign up it becomes ""ooohhh sorry due to recent guidelines this kind of account isn't eligible for paperless statements"""

negative: "According to IRS Bulletin 2007-39, you can elect the maximum contribution allowed by your new employer (please note that though the IRS allows a maximum limit on Health FSA of $2,600, your employer's plan can limit that to a lower amount) so long as both employers are not part of a ""controlled group.""  The complicated part of this is that your wife is covered by HDHP w/ HSA. Under IRS Publication 969, you cannot make contributions to an HSA if you are covered by any other health care coverage. Since your spouse would also be covered by your FSA, that would disqualify your spouse from making any contributions towards her HSA."

negative: I'm not sure about reimbursement, you'll have to talk to a tax adviser (CPA/EA licensed in your State). From what I know, if you pay your own insurance premiums - they're not deductible, and I don't think reimbursements change that. But again - not sure, verify. However, since you're a salaried employee, even if your own, you can have your employer cover you by a group plan. Even if the group consists of only you. Then, you'll pay your portion as part of the pre-tax salary deduction, and it will be deductible. The employer's portion is a legitimate business expense. Thus, since both the employee and the employer portions are pre-tax - the whole cost of the insurance will be pre-tax. The catch is this: this option has to be available to all of your employees. So if you're hiring an employee a year from now to help you - that employee will be eligible to exactly the same options you have. You cannot only cover owner-employees. If you don't plan on hiring employees any time soon, this point is moot for you, but it is something to keep in mind down the road as you're building and growing your business.

negative: If it were possible for every person in the world to run their own business at the same time maybe you'd have a point, but that's not how things work. As it stands now there inherently must be more employees than business owners and the nature of that relationship inherently favours the owner. A few laws in place to somewhat balance the scales is not a bad thing. At the end of the day, the employer was breaking the law and now they have to suffer the consequences.

negative: "The IRS has a FAQ page about Hardship Distributions from a 401(k). The IRS defines a hardship in this case as ""an immediate and heavy financial need of the employee and the amount must be necessary to satisfy the financial need.""  Included in the list of examples is ""certain expenses for the repair of damage to the employee's principal residence.""  However, whether your former employer allows this particular reason is up to their plan documents.  It sounds like, from what you described on the website, that your plan does include this reason as a possibility for you. Next, you need to decide if the projects you have in mind qualify as ""repair of damage.""  This uses the same rules as the deductible casualty rules found in IRS Publication 547, which defines a casualty this way: A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. A sudden event is one that is swift, not gradual or progressive. An unexpected event is one that is ordinarily unanticipated and unintended. An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Examples are given in Pub 547.  If the projects you have in mind are necessary due to an event (like a flood or a fire), it might be allowed.  But most ""home improvement"" projects would not qualify for this. If you'd like a way to simplify your financial profile, an option for you, since you no longer work at this employer, is to roll over this 401(k) into a Rollover (traditional) IRA.  This way, you won't have to deal with your former employer anymore.  You could pick an IRA custodian that you already have another account with, if you like, and reduce the number of statements that you get.  But the IRA will not let you take money out without penalty for home improvement projects, either."

negative: If the employees keep it up, then it would make sense for Walmart to raise their wages because they would not be able to find employees without raising the wage.  If Walmart is always able to find employees who will work at minimum wage, though, it can be argued that the minimum wage is what that job is worth both to the employees (otherwise no one would take the job) and employers.  Of course, this does not necessarily mean it is completely compassionate to do so since it is always nice to give people more money, it does show that this is efficient (using the economics sense of the word).

negative: No it wouldn't. You'd have to change the law to make **both** settlements and damages non-deductible.  In another comment on this thread I wrote about what's deductible and what's not. The **fine** paid to the government is not deductible. The **damages** or **restitution** paid to another party are.   Since a settlement is essentially damages and/or restitution paid to someone who's not the US Government, then it's deductible.   I haven't read the case law, but I'm sure that the argument is that since they got money that they shouldn't have in the first place, then they shouldn't have to pay taxes on it. Otherwise, what's to stop the IRS from making them pay taxes on phantom income all over the place?  The fine paid to the Govt is the punishment, and I'm sure that the prosecutors aren't complete morons and do take the tax consequences into consideration.

negative: "This has to do with the type of plan offered: is it a 401(k) plan or a profit-sharing plan, or both? If it's 401(k) I believe the IRS will see this distribution as elective and count towards the employee's annual elective contribution limit. If it's profit sharing the distribution would be counted toward the employer's portion of the limit. However -- profit sharing plans have a formula that's standard across the board and applied to all employees. i.e. 3% of company profits given equally to all employees. One of the benefits of the profit sharing plans is also that you can use a vesting schedule. I'd consult your accountant to see how this specifically impacts your business - but in the case you describe this sounds like an elective deferral choice by an employee and I don't see how (or why) you'd make this decision for them. Give them the bonus and let them choose how it's paid out. Edit: in re-reading your question it actually sounds like you're wanting to setup a profit sharing type situation - but again, heed what I said above. You decide the amount of ""profit"" - but you also have to set an equation that applies across the board. There is more complication to it than this brief explanation and I'd consult your accountant to see how it applies in your situation."

negative: "IRA is not always an option. There are income limits for IRA, that leave many employees (those with the higher salaries, but not exactly the ""riches"") out of it. Same for Roth IRA, though the MAGI limits are much higher. Also, the contribution limits on IRA are more than three times less than those on 401K (5K vs 16.5K). Per IRS Publication 590 (page 12) the income limit (AGI) goes away if the employer doesn't provide a 401(k) or similar plan (not if you don't participate, but if the employer doesn't provide). But deduction limits don't change, it's up to $5K (or 100% of the compensation, the lesser) even if you're not covered by the employers' pension plan. Employers are allowed to match the employees' 401K contributions, and this comes on top of the limits (i.e.: with the employers' matching, the employees can save more for their retirement and still have the tax benefits). That's the law. The companies offer the option of 401K because it allows employee retention (I would not work for a company without 401K), and it is part of the overall benefit package - it's an expense for the employer (including the matching). Why would the employer offer matching instead of a raise? Not all employers do. My current employer, for example, pays above average salaries, but doesn't offer 401K match. Some companies have very tight control over the 401K accounts, and until not so long ago were allowed to force employees to invest their retirement savings in the company (see the Enron affair). It is no longer an option, but by now 401K is a standard in some industries, and employers cannot allow themselves not to offer it (see my position above)."

negative: It would be unusual but it is possible that the expenses could be very high compared to your income. The IRS in pub 529 explains the deduction. You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. An expense is ordinary if it is common and accepted in your trade,   business, or profession. An expense is necessary if it is appropriate   and helpful to your business. An expense doesn't have to be required   to be considered necessary. The next part lists examples. I have cut the list down to highlight ones that could be large. You may be able to deduct the following items as unreimbursed employee   expenses. Damages paid to a former employer for breach of an employment contract. Job search expenses in your present occupation. Legal fees related to your job. Licenses and regulatory fees. Malpractice insurance premiums. Research expenses of a college professor. Rural mail carriers' vehicle expenses. Tools and supplies used in your work. Work clothes and uniforms if required and not suitable for everyday use. Work-related education. If the term of employment was only part of the year, one or more of the these could dwarf your income for the year. Before deducting something that large be sure you can document it. I believe the IRS computers would flag the return and I wouldn't be surprised if they ask for additional proof.

negative: There are a few reasons: 1) Deductions and credits. We have a lot of them. While I suppose we could pass this information on to our employers for them to file, why would we want to? That just unnecessarily adds a middle-man as well as sharing potentially private information more than it needs to be shared. This is the one that effects the most people. 2) Income sources. While normal employment, contract work, and normal investment income already gets reported to the IRS, this is not true for all sources of income. For one, the U.S. is almost completely by itself on actually taxing income that its citizens earn outside of the U.S. While this policy is completely absurd, the only way for the government to know about such income is for the person to report it, since the IRS can't require foreign employers to send information to them. Also, barter income as well as other income that doesn't meet the qualifications for the payer to be required to inform the government requires the employee to self-report. Similarly, capital gains on things outside of normal investments (real estate, for instance) require self-reporting. Having said all of this, U.S. reporting requirements are absurd and illogical. For instance, the IRS already knows about all of my stock trading activity. My broker is required to report it to them. Yet, I still have to list out every single trade on my own return, which is really tedious and completely redundant. For charitable contributions, on the other hand, I only have to give the IRS the final total without listing out all of the individual donations, despite the fact that they don't have that information made available to them by another source. It makes no sense at all, but such is the federal government.

negative: There is already large demand for new jobs. There is also a large labor supply available for jobs. When the buyer (employer) meets the price of the seller (employee), a job is created. The reason there is not 100% employment is that not every employee is willing to work for what they can get, and not every employer is willing to pay what an employee is willing to work for.

negative: Edit: Let's forget about Wikipedia.  From the horse's mouth: The cafeteria plan rules require that a health FSA provide uniform coverage throughout the    coverage period (which is the period when the employee is covered by the plan).  See Proposed    Treasury Regulations Section 1.125-5(d).  Under the uniform coverage rules, the maximum amount    of reimbursement from a health FSA must be available at all times during the coverage period.  This    means that the employee’s entire health FSA election is available from the first day of the plan year    to reimburse qualified medical expenses incurred during the coverage period.  The cafeteria plan    may not, therefore, base its reimbursements to an employee on what that employee may have    contributed up to any particular date, such as the date the employee is laid-off or terminated.  Thus,    if an employee’s reimbursements from the health FSA exceed his contributions to the health FSA at    the time of lay-off or termination, the employer cannot recoup the difference from the employee. (emphasis added)  http://www.irs.gov/pub/irs-wd/1012060.pdf Uniform Coverage Rule The IRS has required that “health FSAS must qualify as accident or health plans. This means    that, in general, while the health coverage under the FSA need not be provided through a    commercial insurance contract, health FSAS must exhibit the risk-shifting and risk-distribution    characteristics of insurance.” This concept has led to the “uniform coverage” rule.  The uniformcoverage rule requires that the maximum amount of an employee’s projected    elective contributions to a health FSA must be available from the first day of the plan year to    reimburse the employee’s qualified medical expenses, regardless of the amount actually    contributed to the plan at the time that reimbursement is sought.  Citing proposed Treasury Regulations Section  the IRS General Counsel has    determined that:  “Under the uniform coverage rules, the maximum amount of reimbursement from    a health FSA must be available at all times during the coverage period. The    cafeteria plan may not, therefore, base its reimbursements to an employee on what    that employee may have contributed up to any particular date, such as the date the    employee is laid-off or terminated. Thus, if an employee’s reimbursements from    the health FSA exceed his contributions to the health FSA at the time of  or    termination, the employer cannot recoup the difference from the employee.”  This rule is unfair and also constitutes a disincentive to establishing FSAS because of the    exposure to out-of pocket expenditures arising from employees who leave the company.  NSBA believes that the uniform coverage rule should also be revised if the  or lose-   it rule is changed. Revising the use-it or lose-it rule while leaving the uniform coverage rule unchanged will introduce an inappropriate asymmetry to FSAS. An employer should    be allowed to deduct any negative amount arising from insuftîcient employee    contributions from a terminating partieipant’s last paycheck. http://www.ecfc.org/files/legislative-news/NSBA_(David_Burton).pdf (emphasis added)  Now, that's some fresh bitterness for you right there.  (Dated August 17, 2012)

negative: > It's often the minimum wage employees that I see abused the worst, they are easily replaceable by their employer and punishment for violating workers rights is a slap on the wrist.    Yeah, this is a good point.  I think the experience skews significantly as you go down the skill-level / prestige of the job.  An interesting observation (maybe) would be that this mostly applies to people who are *only just* above minimum wage, such as Walmart employees.  They get paid enough that it would be hard to find another retail job at the same pay level.  But certainly not enough to be considered well-off.  True minimum wage earners who I've known typically don't give even the smallest shit about their employer.  They switch employers in the blink of an eye, and at the slightest provocation.  Minimum wage jobs are as much a commodity for the employees, as minimum-wage employees are to the company.   > A lot of this was to get over a peak of work... However now I have been granted some flexibility   Well said.  My situation is very similar.  The company communicates their needs to me, and so I'm well aware of when peaks are likely to occur, and of the consequences of missing deadlines, etc.  It rarely comes as a surprise.

negative: "In the normal course of events, you should receive a separate check for the amount of the purchase, and that amount should not be included in your wages as shown on your W-2 statement.  If the amount is included on your paycheck, it should still be listed separately as a non-taxable item, not as part of wages paid.  In other words, the IRS should not even be aware that this money  was paid to you, there is no need to list the amount anywhere on your  income tax return, and if you are paranoid about the matter, staple the stub attached to the reimbursement to a copy of your bank statement showing that you deposited the money into your account and save it in your file of tax papers for the year, just in case the IRS audits you and requires you to document every deposit in your checking account.  The amount is a business expense that is deductible on your employer's tax return, and your employer is also required to keep documentation that the  employee expense reimbursement plan is running as per IRS rules (i.e., the employer is not slipping money to you ""under the table"" as a reimbursement instead of paying you wages and thus avoiding the employer's share of FICA taxes etc) and that is why your employer needs the store receipt, not a hand-written note from you, to show the IRS if the IRS asks. You said you paid with ""your own cash"" but in case this was not meant literally and you paid via credit card or debit card or check, then any mileage award, or points, or cash back for credit card use are yours to keep tax-free, and any interest charges  (if you are carrying a revolving balance or paid through your HELOC) or  overdraft or bounced check fees are yours to pay."

negative: Should I have a W-2 re-issued? A W-2 can be corrected and a new copy will be filed with the IRS if your employer incorrectly reported your income and withholding on a W-2 that they issued. In this case, though the employer didn't withhold those taxes, they should not reissue the W-2 unless they plan to pay your portion of the payroll taxes that were not withheld. (If they paid your share of the taxes, that would increase your gross income.) Who pays for the FICA I should have paid last year? Both you and your employer owe 7.65% each for FICA taxes. By law your employer is required to pay their half and you are required to pay your half. Both you and your employer owe additional taxes because of this mistake. Your other questions assume that your employer will pay your portion of the taxes withheld. You employer could decide to do that, but this also assumes that it was your employer's fault that the mistakes were made. If you transitioned to resident alien but did not inform your employer, how is that your employer's fault?

negative: In Singapore, this is sufficiently common that the Singapore IRS has a page on their website dedicated to informing employers of how to properly pay this under Responsibilites of an Employer.   Specifically, tax paid by employer is taxable income for the employee (as it's really the employee's responsibility), so they must pay tax for that tax.  A tax-on-tax is computed for the tax paid, which also would be owed by the employer if they were paying the full tax rate for the employee. As a clarification, this is not the employer being truly responsible for the employee's income; this is the employer compensating the employee further to offset their taxable income.  This is effectively a fringe benefit, although it may be particularly useful in countries where either tax evasion is common (and thus an employer must compete with employers willing to pay under the table) or where employers are competing with others in nearby countries with lower tax rates.  It is not the same thing as the employer making your income nontaxable, though, and has implications for your tax filing. Significantly, it is likely that if you have additional income beyond income from that employer, it is likely to be taxed at your highest tax rate, as the employer will likely calculate the tax due based on their income being the only income you have in that year. *Edit based on emphasis in question: I'm not from Singapore nor am I a lawyer, but based on my reading of the IRAS website, it looks like you do not have to file if you have no other source of income, because they have a No-Filing Service which takes income information from your employer automatically and generates a tax bill, which presumably would be fully paid in your case.  This only aplies if you have no other sources of income, however; you still have to file if you have other sources of income since your employer would not know about them. If you are eligible for this service, you should get a letter informing you as such.  They also have a tool to check your filing status on their website.

negative: I few years ago my company in the Washington DC area allowed employees to contribute their own pre-tax funds. The system at the time wasn't sophisticated enough to prevent what you are suggesting. The money each month was put on a special credit card that could only be used at certain types of locations. You could load it onto the Metro smart trip card, and use it for many months. Many people did this, even though the IRS says you shouldn't. But eventually the program for the federal employees changed, their employer provided funds were put directly onto their Smart Trip card. In fact there were two buckets on the card: one to pay for commuting, and the other to pay for parking. There was no way to transfer money between buckets. The first day of the new month all the excess funds were automatically removed from the card;and the new funds were put onto the card. If your employer has a similar program it may work the same way. HR will know.


query: How does pre-market trading work?

positive: "First of all, not all brokers allow trading during pre-market and post-market.  Some brokers only allow trading during the regular hours (9:30am - 4pm ET). Second of all, while you can place orders using limit orders and market orders during regular trading hours, you can only use limit orders during pre-market and post-market.  This is because the liquidity is much lower during pre-market and post-market, and using market orders could result in some trades filling at horrible prices.  So brokers don't allow using market orders outside of regular trading hours. Third, some brokers require you to specify that you want your order to be executed during pre-market or post-market.  For example, my broker allows me to specify either ""Day"" or ""Ext"" for my orders.  ""Day"" means I want my order to execute only during regular trading hours, and ""Ext"" means I want my order to execute at any time - pre-market, regular trading hours, or post-market. Finally, if your broker allows pre/post market trading, and you place a limit order while specifying ""Ext"", then your trade can happen in real-time during pre-market or post-market.  Per your example, if a stock is trading at $5 at 8am, and you put in a limit order (while specifying ""Ext"") to buy it at $5 at 8am, then your order will execute at that time and you will buy that stock at 8am."

negative: Pre-Market trading activity is shown on the site from 4:15 - 9:30 AM (actual trading starts at 4:00 AM EST) The NASDAQ Stock Market Trading Sessions (Eastern Time) Pre-Market Trading Hours from 4:00 a.m. to 9:30 a.m. Market Hours from 9:30 a.m. to 4:00 p.m. After-Market Hours from 4:00 p.m. to 8:00 p.m. Read more: http://www.nasdaq.com/about/trading-schedule.aspx#ixzz38OtcISrq In this case GOOG did not trade in the Pre-market until that time and FB was.

negative: I used to work on the software in the front office (and a bit of the middle office) of a brokerage firm. This page describes the process pretty well. Basically there are three parts: So to your question: how does an order get executed? ETFs work the same since they are effectively shares of a mutual fund's assets. True mutual fund shares work differently since they don't get traded in the market. They get traded at the end of the market as just a bookkeeping exercise.

negative: If I understand you correctly, you are noticing that a stock's price can change drastically when the time changes from pre-market trading hours to open market hours. This could occur because a much smaller pool of investors make trades during pre-market and after-market hours. When the regular market opens there is a large influx of trades, causing the prices to jump.

negative: "NASDAQ has Pre and After market : NASDAQ Trading Schedule Regular Trading Session Schedule The NASDAQ   Stock Market Trading Sessions (Eastern Time) Pre-Market Trading Hours from 4:00 a.m. to 9:30 a.m.   Market Hours from 9:30 a.m. to 4:00 p.m.   After-Market Hours from 4:00 p.m. to 8:00 p.m.   Quote and order-entry from 4:00 a.m. to 8:00 p.m.   Quotes are open and firm from 4:00 a.m. to 8:00 p.m. You can trade in Pre/After Market but liquidity is very low. If an ""unexpected world events"" occurs, the volume/liquidity will most certainly increase. Another example is the Forex Market that's open 24/7 around the world. As one major forex market closes, another one opens. According to GMT,   for instance, forex trading hours move around the world like this:   available in New York between 01:00 pm – 10:00 pm GMT; at 10:00 pm GMT   Sydney comes online; Tokyo opens at 00:00 am and closes at 9:00 am   GMT; and to complete the loop, London opens at 8:00 am and closes at   05:00 pm GMT. This enables traders and brokers worldwide, together   with the participation of the central banks from all continents, to   trade online 24 hours a day. src"

negative: It looks like GOOG did not have a pre-market trade until 7:14 am ET, so Google Finance was still reporting the last trade it had, which was in the after-hours session yesterday. FB, on the other hand, was trading like crazy after-hours yesterday and pre-market today as it had an earnings report yesterday.

negative: Candlesticks and TA are a relic of pre-computer trading, period. Market makers use sophisticated algorithms not for trading, but manipulations.

negative: There are several reasons it is not recommended to trade stocks pre- or post-market, meaning outside of RTH (regular trading hours). Since your question is not very detailed I have to assume you trade with a time horizon of at least more than a day, meaning you do not trade intra-day. If this is true, all of the above points are a non-issue for you and a different set of points becomes important. As a general rule, using (3) is the safest regardless of what and how you trade because you get price guarantee in trade for execution guarantee. In the case of mid to longer term trading (1 week+) any of those points is viable, depending on how you want to do things, what your style is and what is the most comfortable for you. A few remarks though: (2) are market orders, so if the open is quite the ride and you are in the back of the execution queue, you can get significant slippage. (1) may require (live) data of the post-market session, which is often not easy to come by for the entire US stock universe. Depending on your physical execution method (phone, fax, online), you may lack accurate information of the post-market. If you want to execute orders based on RTH and only want to do that after hours because of personal schedule constraints, this is not really important. Personally I would always recommend (3), independent of the use case because it allows you more control over your orders and their fills. TL;DR: If you are trading long-term it does not really matter. If you go down to the intra-day level of holding time, it becomes relevant.

negative: "When the VC is asking what your Pre-Money Valuation is, he's asking what percentage of shares his $200,000 will buy. If you say your company is worth $800K, then after he puts the money in, it will be worth $1M, and he will own 20% of all shares – you'll still own the remainder. So when the VC is asking for a valuation, what he really wants to know is how much of your company he's going to own after he funds you.  Determining your pre-money valuation, then, is a question of negotiation: how much money will you need, how likely are you to require more money later (and thus dilute the VC's shares, or give up more of your own shares), how likely is your business to survive, and how much money will it make if it does survive? It isn't about the actual value of your business right now, as much as it is ""how much work has gone into this, and how successful can it be?"" The value is going to be a bit higher than you expect, because the work is already done and you can get to market faster than someone else who hasn't started yet. VCs are often looking for long shots – they'll invest in 10 companies, and expect 7 to fail, 2 to be barely-profitable, and the last one to make hilarious amounts of money. A VC doesn't necessarily want 51% of your company (you'll probably lose motivation if you're not in charge), but they'll want as much as they can get otherwise."

negative: "- In a quote driven market, must every investor trade with a market        maker? In other words, two parties that are both not market makers        cannot trade between themselves directly? In a way yes, all trades go through a market maker but those trades can be orders put in place by a ""person"" IE: you, or me. - Does a quote driven market only display the ""best"" bid and ask        prices proposed by the market makers? In other words, only the        highest bid price among all the market makers is displayed, and        other lower bid prices by other market makers are not? Similarly,        only the lowest ask price over all market makers is displayed, and        other higher ask prices by other market makers are not? No, you can see other lower bid and higher ask prices. - In a order-driven market, is it meaningful to talk about ""the current stock price"", which is the price of last transaction? Well that's kind of an opinion. Information is information so it won't be bad to know it. Personally I would say the bid and ask price is more important. However in the real world these prices are changing constantly and quickly so realistically it is easier to keep track of the quote price and most likely the bid/ask spread is small and the quote will fall in between. The less liquid a security is the more important the bid/ask is. -- This goes for all market types. - For a specific asset, will there be several transactions happened at    the same time but with different prices? Today with electronic markets, trades can happen so quickly it's difficult to say. In the US stock market trades happen one at a time but there is no set time limit between each trade. So within 1 second you can have a trade be $50 or $50.04. However it will only go to $50.04 when the lower ask prices have been exhausted.   - Does an order driven market have market makers?  By definition, no. - What are some examples of quote driven and order driven financial markets, in which investors are commonly trading stocks and derivatives, especially in U.S.? Quote driven market: Bond market, Forex. Order driven market: NYSE comes from an order driven market but now would be better classified as a ""hybird market"" Conclusion: If you are asking in order to better understand today's stock markets then these old definitions of Quote market or Order market may not work. The big markets in the real world are neither. (IE: Nasdaq, NYSE...) The NYSE and Nasdaq are better classified as a ""hybird market"" as they use more then a single tactic from both market types to insure market liquidity, and transparency. Markets these days are strongly electronic, fast, and fairly liquid in most cases. Here are some resources to better understand these markets: An Introduction To Securities Markets The NYSE And Nasdaq: How They Work Understanding Order Execution"

negative: "I worked for a small private tech company that was aquired by a larger publicly traded tech company.  My shares were accelerated by 18 months, as written in the contract.  I excercised those shares at a very low strike price (under $1) and was given an equal number of shares in the new company.  Made about $300,000 pre tax.  This was in 2000. (I love how the government considered us ""rich"" that year, but have never made that amount since!)"

negative: You cannot trade in pre-IPO shares of companies like Facebook without being an accredited investor. If a website or company doesn't mention that requirement, they are a scam. A legitimate market for private shares is SecondMarket.

negative: Is that indicator can only be used for short-term trade? First of all, indicator works perfect during trends and oscillator works perfectly in the range market(or flat market). So, indicator can be used for long term, as well as short term. I mean if it is a range market, using this or any other indicator will not help much, so it you should consider market direction first. If it can be used to long-term trade, is there something I need to change from the parameters used? like, only using SMMA(5,8,13)? The parameters are there to change them. Of course you can change them based on your trading style. Considering my statement above does not mean that trading is very easy. I never use indicators alone to make trading decisions. It is always good to use oscillator to filter out bad trading signals.

negative: "Does your company offer a 401k? or similar pre-tax retirement plans? Is your company a publicly traded company? These questions are important, basically the key to any of your investments should be diversification. This means buying more than one kind of investment, amongst stock(s), bonds, real estate or more. The answer to ""How Much"" of your salary should go to company stock, is subjective. I personally would contribute the max toward a retirement plan or even post-tax savings, which would be invested in a variety of public companies.  Hope that helps."

negative: how do they turn shares into cash that they can then use to grow their business? Once a Company issues an IPO or Follow-On Public Offer, the company gets the Money. Going over the list of question tagged IPO would help you with basics. Specifically the below questions; How does a company get money by going public in an IPO? Why would a company care about the price of its own shares in the stock market? Why would a stock opening price differ from the offering price?  From what I've read so far, it seems that pre-IPO an investment bank essentially buys the companies public shares, and that bank then sells them on the open market. Is the investment bank buying 100% of the newly issued public shares? And then depositing the cash equivalent into the companies bank account? Additionally, as the stock price rises and falls over the lifetime of the company how does that actually impact the companies bank balance? Quite a bit on above is incorrect. Please read the answers to the question tagged IPO. Once an IPO is over, the company does not gain anything directly from the change in shareprice. There is indirect gain / loss.

negative: Sounds to me like you're describing just how it should work.  Ask is at 30, Bid is at 20; you offer a new bid at 25.  Either: Depending on liquidity, one or the other may be more likely. This Investorplace article on the subject describes what you're seeing, and recommends the strategy you're describing precisely. Instead of a market order, take advantage of the fact that the options world truly is a marketplace — one where you can possibly get a better price just by asking. How does that work? If you use a limit order (instead of a market order) when opening a position, you can tell your broker how much you are willing to pay to enter a trade. For example, if you enter a limit price of $1.15, you can see whether the market-maker will bite. You will be surprised at how many times you will get your price (i.e., $1.15) instead of the ask price of $1.30. If your order at $1.15 is not filled after a few minutes, you can modify your order and pay the ask price by entering a market order or limit order at the ask price (that is, you can tell your broker to pay no more than $1.30).

negative: "And what's wrong with lower cost? What makes you entitled to higher wage when someone can do it for lower cost?  Why do you like eating like a king in from pre industrial era? Why do you not like paying fortune for bacons? Call it use or abuse. That's how it always have worked and made capitalism so successful.  I didn't claim ""in ideal economy"". I said in competitive market. There are many industries that are competitive.  Many of them have shown that outsourcing portion of IT is the right move. Even Cloud platform such as Azure and AWS are replacement of some IT work traditionally done.  Free trade of goods and services(barring externalities and risks) are econ 101. If you don't get it, I suggest you take up a reading on Ricardian Theory.   Honestly, I was lucky to have a good professor go over it with me."

negative: I don't think that the trading volume would impact a broker's ability to find shares to short.  You might think that a lot more people are trying to short a stock during regular trading hours than in the pre-market, and that's probably true.  But what's also true is that a lot more people are covering their shorts during regular trading hours than in the pre-market.  For stocks that have difficulty in finding shares to short, any time someone covers a short is an opportunity for you to enter a short. If you want to short a stock and your broker is rejecting your order because they can't find shares to short, then I would recommend that you continue placing that order throughout the day.  You might get lucky and submit one of those orders right after someone else has covered their short and before anyone else can enter a short.  I have had success doing this in the past.

negative: To me, the most important thing for young people to learn about personal finance is the connection between service and income.  Most, rightly look for a way to earn money and advance the lifestyle of their home life.  How does one do that?  Grinding it out in a 9-5 does not seem attractive while living the lifestyles of those on TV would be awesome.   The temptation is to try all these tricks to get money, but absent from their plan is how they serve their fellow man in order to receive that money. Stars, like the Kardashians are a marketing machine despite the carefree life displayed on the TV.  They have served many budding companies well by selling their products to certain demographics.  Most young people do not make that connection.   So they try things like trading Forex, gold or whatever the latest thing is.  It does not work as there is no service to their fellow man.  They get a job at a fast food chain and complain about their pay in accordance with their work.  Well sure, but again they are serving such few people that one can only expect a small income.   The better and more people one can serve, in general, the higher a person's income.

negative: You seem to be confused - try answering these:  1. Whom do the traders work for?  2. What are the traders trading and how do they acquire those vehicles?  3. How does a company make money and how does that money get deployed?  Google will be crucial for these, but will answer your questions. If you choose to get in finance, remember the golden rule: if you have a question, Google it first.

negative: What does it mean when some one says that today there was a lot of net selling or buying in a stock. What does it mean because for every selling there is also a buying going on then how can you determine a selling or buying ? Generally if the price of stock has gone down compared to previous day, the trend is of selling. As the price can be volatile, there maybe few trades that are above close price of previous day, or below close price of previous day.  How can you calculate average trade price for a stock It is simple {sum of all [price*quantity]}/quantity. Related question Equity market inflow meaning

negative: "Your questions In the world of technical analysis, is candlestick charting an effective trading tool in timing the markets? It depends on how you define effective. But as a standalone and systematic strategy, it tends not to be profitable. See for example Market Timing with Candlestick Technical Analysis: Using robust statistical techniques, we find that candlestick trading rules are not profitable when applied to DJIA component stocks over 1/1/1992 – 31/12/2002 period. Neither bullish or bearish candlestick single lines or patterns provide market timing signals that are any better than what would be expected by chance. Basing ones trading decisions solely on these techniques does not seem sensible but we cannot rule out the possibility that they compliment some other market timing techniques. There are many other papers that come to the same conclusion. If used correctly, how accurate can they be in picking turning points in the market? Technical analysts generally fall into two camps: (i) those that argue that TA can't be fully automated and that interpretation is part of the game; (ii) those that use TA as part of a systematic investment model (automatically executed by a machine) but generally use a combination of indicators to build a working model. Both groups would argue (for different reasons) that the conclusions of the paper I quoted above should be disregarded and that TA can be applied profitably with the proper framework. Psychological biases It is very easy to get impressed by technical analysis because we all suffer from ""confirmation bias"" whereby we tend to acknowledge things that confirm our beliefs more than those that contradict them. When looking at a chart, it is very easy to see all the occurences when a certain pattern worked and ""miss"" the occurences when it did not work (and not missing those is much harder than it sounds). Conclusions"

negative: Per a recommendation from WallStreetBets I wanted to post this here.  Does anyone have a recommendation on how to get a job at a Bank being a Market Maker?  I am fascinated by the trading industry and after listening to an interview with a former market maker I want to explore this as a career choice.

negative: "TLDR:  Why can't banks give me my money? We don't have your money. Who has my money? About half a dozen different people all over the world. And we need to coordinate with them and their banks to get you your money. I love how everyone seems to think that the securities industry has super powers.  Believe me, even with T+3, you won't believe how many trades fail to settle properly.  Yes, your trade is pretty simple. But Cash Equity trades in general can be very complicated (for the layman).  Your sell order will have been pushed onto an algorithmic platform, aggregated with other sell order, and crossed with internal buy orders. The surplus would then be split out by the algo to try and get the best price based on ""orders"" on the market.  Finally the ""fills"" are used in settlement, which could potentially have been filled in multiple trades against multiple counterparties. In order to guarantee that the money can be in your account, we need 3 days. Also remember, we aren't JUST looking at your transaction. Each bank is looking to square off all the different trades between all their counter parties over a single day. Thousands of transactions/fills may have to be processed just for a single name. Finally because, there a many many transactions that do not settle automatically, our settlements team needs to co-ordinate with the other bank to make sure that you get your money. Bear in mind, banks being banks, we are working with systems that are older than I am. *And all of the above is the ""simplest"" case, I haven't even factored in Dark Pools/Block trades, auctions, pre/post-market trading sessions, Foreign Exchange, Derivatives, KYC/AML."

negative: The way deductions work normally does not take into account what account the transaction was made using.  I.e. you report your gross income, your deductions and they subtract the deductions from the income.  What's left is your taxable income.   The tricky part comes with pre-tax contributions to tax advantaged accounts (like 401(k)).  Those plans require the contributions to be made by your company.  Since contributions to 529 plans are not deductible on your federal income taxes, the money is not going to be directly deposited. So it does not matter how the money goes into the plan.  Just make sure you keep a record of your contributions.

negative: "Math says invest in the Market (But paying off your mortgage early is a valid option if you are very risk averse.) You are going to get a better return by investing in the stock market.  In the US in 2015/2016, mortgages are 3%-4%, and give you a tax break.  The rate of return on the stock market is ~10%, (closer to 6% after you subtract out inflation, taxes, fees, etc.) Since 10 > 3, (or 6% > 4%, to use the pessimistic numbers)  investing in the market is the better deal. But... The market has risk, and your mortgage does not.  If you are very risk averse paying off the mortgage may make sense. As an example:  Family A has a single ""breadwinner"", who works a low skilled job. Family B has 2 working spouses, both in high skill white collar positions.   These two families are going to have wildly different risk tolerances.  It may make sense for family A to ""invest"" its extra money in paying off the mortgage, after they have tackled high interest debt, built an emergency fund, maxed the 401k, etc. Personally I would not: in the US you cannot recoup pre-payments if you lose your job.  If I was very risk averse, I would keep my extra money as cash, so I could pay my mortgage after I lost my job.  It is never going to make sense for family B to pay the mortgage early.  At that point, any decision to pre-pay is going to be based on emotion and not logic."

negative: How long is a piece of string?  This will depend on many variables. How many trades will you make in a day? What income would you be expecting to make? What expectancy do you need to achieve? Which markets you will choose to trade?  Your first step should be to develop a Trading Plan, then develop your trading rules and your risk management. Then you should back test your strategy and then use a virtual account to practice losing on. Because one thing you will get is many losses. You have to learn to take a loss when the market moves against you. And you need to let your profits run and keep your losses small. A good book to start with is Trade Your Way to Financial Freedom by Van Tharp. It will teach you about Expectancy, Money Management, Risk Management and the Phycology of Trading. Two thing I can recommend are: 1) to look into position and trend trading and other types of short term trading instead of day trading. You would usually place your trades after market close together with your stops and avoid being in front of the screen all day trying to chase the market. You need to take your emotion out of your trading if you want to succeed; 2) don't trade penny stocks, trade commodities, FX or standard stocks, but keep away from penny stocks. Just because you can buy them for a penny does not mean they are cheap.

negative: "No you don't have to be super-rich.  But... the companies do not have to sell you shares, and as others mention the government actively restricts and regulates the advertising and sales of shares, so how do you invest?  The easiest way to obtain a stake is to work at a pre-IPO company, preferably at a high level (e.g. Director/VP of under water basket weaving, or whatever).    You might be offered shares or options as part of a compensation package.  There are exemptions to the accredited investor rule for employees and a general exemption for a small number of unsolicited investors.  Also, the accredited investor rule is enforced against companies, not investors, and the trend is for investors to self-certify. The ""crime"" being defined is not investing in things the government thinks are too risky for you.  Instead, the ""crime"" being defined is offering shares to the public in a small business that is probably going to fail and might even be a scam from the beginning.   To invest your money in pre-IPO shares is on average a losing adventure, and it is easy to become irrationally optimistic.  The problem with these shares is that you can't sell them, and may not be able to sell them immediately when the company does have an IPO on NASDAQ or another market.  Even the executive options can have lock up clauses and it may be that only the founders and a few early investors make money."

negative: "> How does Equifax lose sales after a breech? Unless their data has been corrupted or falsified, it's still good to sell or charge for each credit pull.  That might be true (it might not be - I don't know how flexible demand is between the 3 bureau's).  But it isn't true for most breaches.  >all three are above their pre-hack prices.  Sure.  But they lost a lot of money after the breaches  >I don't think the penalty should be ""death"" but considering their total assets is $10B, I don't think any fair penalty would allow the organization to survive. If they were Apple with $820B market cap, then yeah, the $70B would be a harsh and fair, but survivable penalty.  To make it ""fair"" (if there is such a thing) you'd want it to be proportional.  So if it'd be 70B for Apple, it'd be about $850MM for Equifax.  That's how you'd want it done if you want it done by operation of law (as opposed to markets and courts)."

negative: "Nobody has mentioned the futures market yet. Although the stock market closes at 4pm, the futures market continues trading 24 hours a day and 5.5 days a week. Amongst the products that trade in the future market are stock index futures.  That includes the Dow Jones, the S&P 500. These are weighted averages of stocks and their sectors. You would think that the price of the underlying stock dictates the price of the average, but in this day and age, the derivative actually changes the value of the underlying stock due to a very complex combination of hedging practices. (this isn't meant to be vague and mysterious, it is ""delta hedging"") So normal market fluctuations coupled with macroeconomic events affect the futures market, which can ripple down to individual stocks. Very popular stocks with large market caps will most certainly be affected by futures market trading. But it is also worth mentioning that futures can function completely independently of a ""spot"" price. This is where things start to get complicated and long winded. The futures market factor is worth mentioning because it extends even outside of the aftermarket and pre-market hours of stock trading."

negative: "How does Equifax lose sales after a breech?  Unless their data has been corrupted or falsified, it's still good to sell or charge for each credit pull.    I think it's very different from say, a consumer facing organization like Sony or Target or Anthem.  Although even in all 3 cases, you can argue they didn't lose much market share; all three are above their pre-hack prices.    The goal is to allow the market to set a price on the value of security for the rest of the companies in the industry.  I don't think the penalty should be ""death"" but considering their total assets is $10B, I don't think any fair penalty would allow the organization to survive.  If they were Apple with $820B market cap, then yeah, the $70B would be a harsh and fair, but survivable penalty."

negative: The right way to develop confidence is to get educated. Confidence can come from many sources, but the right source of confidence is an understanding of how markets work. Markets react (and overreact) to news. I think the biggest factor to trading successfully is to not allow emotion to drive you. You should determine how much you are comfortable gaining and losing and set those in limit and stop orders rather than just using market orders all of the time. As I've grown in my understanding of the market, I find it much more rare that I feel confident enough to make a specific bet. Most of my money is allocated in index funds, and I only buy and sell small amounts to reset the percentages according to a preset allocation plan. I still keep some cash available for speculative trades in the account where those trades will add the most value.

negative: how does a single employee LLC bring in 500k?  I mean if you want to have it in a low-tax environment, you can probably invest it in something and then pull them out? I don't think you can put away pre-tax earnings to then use on salary costs.