I work for a prop firm in nyc. I receive a draw of 1250.00 per month with no taxes taken out. I will receive a k-1. How is this handled for tax purposes? Will I owe self employment tax or is handled differently as I actually did not earn it from trading profits but owe it back once I become profitable? Thanks
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k-1 tax question
- Thread starter wanttotrade77
- Start date
Hmmm....this is an interesting one. I've prepared and received a lot of K-1's throughout my career but I've never run into this situation where you are receiving a lump sum each month. What I suspect they will do is lump this into Other Income(Loss) and attach the appropriate symbol to it, depending on what you are trading.
For example, assuming you are profitable and trading futures and you averaged $10k per month, including the $1,250 draw per month you would have $120k reported in box 11 (I'm looking at 2008 K-1), code C. Your expenses would be listed in the same box under Code F.
In short, I suspect your draw will be calculated into your total profits with no special handling required.
For example, assuming you are profitable and trading futures and you averaged $10k per month, including the $1,250 draw per month you would have $120k reported in box 11 (I'm looking at 2008 K-1), code C. Your expenses would be listed in the same box under Code F.
In short, I suspect your draw will be calculated into your total profits with no special handling required.
Quote from wanttotrade77:
I work for a prop firm in nyc. I receive a draw of 1250.00 per month with no taxes taken out. I will receive a k-1. How is this handled for tax purposes? Will I owe self employment tax or is handled differently as I actually did not earn it from trading profits but owe it back once I become profitable? Thanks
$1250 / month???? I spend more than that on dinner most nights. You better pick it up a notch from those 10 share orders....
wow maybe i can meet you for dinner and you can give me some pointers. You can pick up the tab.
(Not tax advice, personal opinion only, not representative of Bright Trading or any of it's affiliates).
The $1250 draw "should not" be the determining factor in your
K-1 earnings. For example, our traders get a K-1 based on their actual "mark to market" earnings....say they make $100K, and draw zero (as many do)... they still get a K-1 for the $100K. Now if they made zero, and drew out cash, then no taxable event. If your firm is giving you a "draw against potential future earnings" then be really (really) careful in how you handle it... it'f probably ok, but can be a gigantic red flag to the IRS.
As far as Self Employment tax exemption, that depends on whether your LLC chose the that exemption (as we did).
FWIW,
Don
The $1250 draw "should not" be the determining factor in your
K-1 earnings. For example, our traders get a K-1 based on their actual "mark to market" earnings....say they make $100K, and draw zero (as many do)... they still get a K-1 for the $100K. Now if they made zero, and drew out cash, then no taxable event. If your firm is giving you a "draw against potential future earnings" then be really (really) careful in how you handle it... it'f probably ok, but can be a gigantic red flag to the IRS.
As far as Self Employment tax exemption, that depends on whether your LLC chose the that exemption (as we did).
FWIW,
Don
what box does the $1250 show up in ? that determines whether you'll owe self employment taxes.
sounds like your a schonfeld trader
sounds like your a schonfeld trader
what box of the k-1 would require you to pay self employment taxes?