Phantom income

[Lowman67]

Due to flattening boxed positions of stocks I bought to cover on Dec. 31st and also because of disallowed loses I have $500,000 of phantom income for 2020. Losses will be on 2021 return and I probably won't be able to use based on 3000 write off cap. Do you have any any suggestions on what I can do to avoid the $204,000.00 tax? or at least moderate it.

[ErnieS0]

There's nothing you can really do at this point in time since 2020 is over. You are not able to use 2021 losses to offset 2020 gains. This happened to a lot of people who began day trading for the first time during the dot-com bubble.

You can check to see whether all your transactions are being reported correctly.

If you have a tax penalty you can try to annualize your income if most of your gains took place towards the end of the year.

The IRS also has payment plans.

[fanfare]

@Lowman67 

What is phantom income?

It sounds like the IRS does not recognize such a concept.

[Lowman67]

It is income I did not realize on a stock trade.
Is there still income averaging?

John

[DanielV01]

Income averaging might help you with regards to the underpayment penalty that might calculate, but not with regards to the tax due itself.  So unless you have some other deductions, etc. that might be available on the income you must recognize, you don't have too many options  to reduce the tax.  Of course, if some of the other income you are recognizing are capital gains, your capital losses can be used to offset capital gains from this year.  But capital losses against other income will be limited to $3000.