Do traders pay FICA?

Accdg to IRS publication, anyone who buy/sell securites are exempt from FICA. See previous post. Does'nt make a difference whether you are pro or retail.
 
Quote from buff:

Don is correct. Retail traders are required to pay FICA. Proprietary traders are usually class B members of a Limited Liability Company, classified under the IRS Code as daytraders and exempt from FICA.
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Don is not correct. Retail traders are not required to pay FICA.
 
Sure, if you have income on your Sch. C you'll pay FICA on it. But traders will always have a loss on Sch. C. Trading profits flow through Sch. D and only expenses will be on Sch. C.
 
Quote from Toonces:

I was reading through some past threads on this. It sounds like Don Bright was saying that retail traders pay FICA (Social Security/Medicare) taxes, but traders with pro firms do not.

Is this correct? According to Tresser's book, you don't pay this tax unless you own or rent a seat on the exchange.
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No. Unless you have earned income somewhere. Trading gains are not earned income. The exception to this is if you are a member of an exchange.

Many traders structure their trading business to create some earned income for IRA's etc. You would pay self employment on this portion. If you want more details, try speaking with a trading CPA. I'm not one, and thats about as deep as my knowledge goes.

Jay
 
Lets hope Buff isnt preparing tax returns for traders...His point about the S corps is a different beast anyway...That would be to generate the earned income, I believe, if a trader wanted to be able to make retirement contributions...But that is different than simply being a sole proprietor anyway...
 
To all, I stand corrected! Range, thanks for the IRS website reference. No, I will not be preparing traders' tax returns but excuse me while I go wipe the egg off my face.
 
You are a big man BUFF.

However, in the end you helped to inform a lot of people, who now know a lot more about FICA taxes.

Good luck
 
As far as I can tell from the IRS site and this thread I will no longer be accrueing Social Security (I was laid off). That kinda sux. Anyway, this brought several questions to mind. From here on out it would appear as though I am defined as a "Trader" by the IRS although the requirements are subject to interpretation (what does the IRS consider to be "substantial activity" for instance). Is it beneficial for me to claim "trader" status? I see I can write off some "business" expenses and I don't pay self-employment taxes. Would that technically make me "unemployed"? Can I still contribute to a Roth IRA or do I need "earned income"? If not how can I generate "earned income" without getting a "real job" for a couple weeks?

:confused:

Working as an employee in corporate America sux! Pepsico sux!
 
Quote from khorne55:

As far as I can tell from the IRS site and this thread I will no longer be accrueing Social Security (I was laid off). That kinda sux. . . .
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Trust me - put away a few bucks a week on your own and you'll have far more at retirement than Socialist Security will ever give you. They're doing you a favor.
 
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