oh all right, good weekends coming up to take another look, thanks for the info, Green is always my last word, when they came up with this trader status about all it ever did was allow expense deductions, nothing about earned income, you needed an entity to do that, and then that involved se tax.
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IRS Trader Status
- Thread starter chartman
- Start date
If there are any individual traders on this site that have filed for IRS trader status, would you provide your opinion of this method of tax filing and how it has affected your trading?
How worthwhile is the filing of investment expenses since the majority of a trader's expenses is in commissions and that is figured in cost basis of the securities? Does having trader status tend to make you more of a short term holder with a tendency to overtrade and making wash sales useful? How does MTM affect your end of year trading strategy?
oh all right, good weekends coming up to take another look, thanks for the info, Green is always my last word, when they came up with this trader status about all it ever did was allow expense deductions, nothing about earned income, you needed an entity to do that, and then that involved se tax.
A sole prop-Schedule C trader is an entity, a business, if done correctly, a disregarded entity according to the IRS, same as a single-member LLC. And yes, earned income generally involves SE Tax. I pass through an S-Corp, and life is good with a W2 (and K2).
With new business taxation there are likely changes in store next year. Green even has a scenario where a futures trader might want to forego the 60/40 tax treatment. His blog posts have some interesting stuff.
Trade On!
Can't be any more wrong. You must be one of these types who think you know everything (there is no shortage around here). Trading profits are always excluded from SE tax with several exceptions. Plus your single member S corp thing to get around SE (that you shouldn't even be paying anyway) good luck when you get audited on that one.A sole prop-Schedule C trader is an entity, a business, if done correctly, a disregarded entity according to the IRS, same as a single-member LLC. And yes, earned income generally involves SE Tax. I pass through an S-Corp, and life is good with a W2 (and K2).
With new business taxation there are likely changes in store next year. Green even has a scenario where a futures trader might want to forego the 60/40 tax treatment. His blog posts have some interesting stuff.
Trade On!
It appears my post has been misunderstood.
!. Unless one has an enormous amount of business expenses, I don't see where being able to deduct expenses would be an advantage to file for trader status. Perhaps being able to fund a retirement account, purchase of insurance, etc... could be an incentive.
2. It appears to me that in order to maintain a trader status under the IRS rules, one may have a tendency to overtrade to meet the guidelines.
3. What affect does the IRS rule that all holding at the end of the taxable year must be considered closed and establish a new cost basis have on a trading strategy?
4. Since the major portion of your income must come from trading this could be a hindrance to seeking trader status to someone with sufficient income from other sources.
Of course, being able to avoid wash sales and the limitation on losses would be a positive.
!. Unless one has an enormous amount of business expenses, I don't see where being able to deduct expenses would be an advantage to file for trader status. Perhaps being able to fund a retirement account, purchase of insurance, etc... could be an incentive.
2. It appears to me that in order to maintain a trader status under the IRS rules, one may have a tendency to overtrade to meet the guidelines.
3. What affect does the IRS rule that all holding at the end of the taxable year must be considered closed and establish a new cost basis have on a trading strategy?
4. Since the major portion of your income must come from trading this could be a hindrance to seeking trader status to someone with sufficient income from other sources.
Of course, being able to avoid wash sales and the limitation on losses would be a positive.
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If there are any individual traders on this site that have filed for IRS trader status, would you provide your opinion of this method of tax filing and how it has affected your trading?
How worthwhile is the filing of investment expenses since the majority of a trader's expenses is in commissions and that is figured in cost basis of the securities? Does having trader status tend to make you more of a short term holder with a tendency to overtrade and making wash sales useful? How does MTM affect your end of year trading strategy?
To qualify for trader status you need 720 trades per year and the trades have to be 30 days or shorter. You can have investment expenses other than commissions eg subscriptions, office space, trading computers, trading assistant/ programmer etc.. Advantage of trader status is the ability to write off trading losses in excess of $3k and earned income...
Chartman:
You can deduct home office expense directly. There are 2 ways, there is a flat rate, or a calculated method based on sq footage in relation to your home. As for other expenses, you can deduct those as miscellaneous deduction/expense, but only if you itemize deductions, and only the amount over the miscellaneous deductions 2% of AGI threshold.
Trader status is nothing you should have to "strive to maintain" as you've implied. Either you meet the qualifications or not. It is not a variable that should affect day to day trading, at all.
As for MTM, all profits and losses are taken in the current tax year, whether realized or not.
Good luck.
You can deduct home office expense directly. There are 2 ways, there is a flat rate, or a calculated method based on sq footage in relation to your home. As for other expenses, you can deduct those as miscellaneous deduction/expense, but only if you itemize deductions, and only the amount over the miscellaneous deductions 2% of AGI threshold.
Trader status is nothing you should have to "strive to maintain" as you've implied. Either you meet the qualifications or not. It is not a variable that should affect day to day trading, at all.
As for MTM, all profits and losses are taken in the current tax year, whether realized or not.
Good luck.
To qualify for trader status you need 720 trades per year and the trades have to be 30 days or shorter.
link please.....I'm 99% this is complete BS.
....everyone is a tax specialist SMH.