Need Tax advice !!! Stay retail or form an LLC if you make $200-300K per year?

My thinking is staying retail and not pay into the SS program since it may not be around or the benefits are so little compare to what I put in.

Thanks to all that contribute with some very good info. [/B][/QUOTE]

You really don't need any tax advice. Simply trade as you are. save the SS and as, if and when you have trading income that approaches six figures sit down with an accounting firm and have them give you the pros and cons of pro trader status vs retail and using an entity (done properly virtually any limited liability entity can be made to work ... even a C corp in some instances).

You are in a place that puts you in a "sweet spot" from a tax point of view. Your job is to change that. Your job is to begin to earn enough that tax planning and weighing options is a reasonable use of your time and resources.

When (notice I say when not if) that day comes don't even put out feelers in a forum. Go to a pro, pay him and do it right.

Tommy
 
Quote from Tommy Ryan:

Go to a pro, pay him and do it right.

Tommy [/B]
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My experience with tax pro's, cpa's, tax attorneys is that most will not save you tax dollars and very few will work out a tax saving strategy that will work, that's if they have any strategy for you at all. After quite a few years in business and after going through a few attorney's and CPA's I've learned how to legally play the system. I may of just had some bad luck but I don't think so, most tax pro's are not doing the best for their clients. I swear some of the CPA's I've had were on the IRS payroll and the tax attorney I used when I formed my first corp years ago was less than useless. I have good people now but I had to educate myself to be able to find someone who could actually help me save some dollars with the IRS. It is hard to find a good tax person but it is doable.
 
Quote from ctarmor-et:

I am read the IRS has two classifications, investor and trader.

If you are considered an investror you could end up with some large tax liabilities. I read something like if you have a trading loss of $200k and then you have a winning of $100k the irs can tax you on a $300k gain ...

I am not sure how correct it is but I could not beleive that can happen ...

Is anyone familiar with these tax classifications ?
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I believe what you are referring to is a wash sale

"An Internal Revenue Service (IRS) rule prohibiting a taxpayer from claiming a loss on the sale of an investment when the same investment was purchased within 30 days before or after the sale date. Also know as the "30-day wash-sale rule". "
 
I have good people now but I had to educate myself to be able to find someone who could actually help me save some dollars with the IRS. It is hard to find a good tax person but it is doable. [/B][/QUOTE]

You raise a good point. I've been dealing with these types of proffessionals for so long and the ones I have are so good that I forget what it was like early on before I understood how much of an art it is to pick good ones.

Good professionals are very hard to find. Most are still working their way up to be hacks. There truly is no easy way to surround yourself with good people except to interview a number (ten is not too many) pick one and then be prepared to fire him fast and go through the process again if need be.

T
 
Quote from le140:

Are anyone in the same situation?
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Some say you need not incorporate until your taxable income exceeds a million.

The one safe and sane option i can find is moving to a state that has no state income tax. I don't recall the entire list, but Florida, Texas, Nevada are on it for certain.

Florida real estate is rather pricey and I'm already bordering Texas - it's my pick and i think a move will save me $55,000 a year but i like it where i am. My state charges 8% income tax on top of federal.

What i want to learn is what constitutes legal Texas resident status? Some people travel outside of their home state for work or pleasure more than they are at home.

Surely there's more (or less) to it than being inside the state 179 days of the year?

If you know, please say:)
 
The first thing a US trader should determine is how he/she will offset the 15.3% SE (self-employment) tax, which in 2008 applies to the first 102K, for a total of $15,606. In 2009, while I am not 100% confident it is enacted yet, 1.45% above 102K with no ceiling applies. Additionally, brokerage accounts titled in the name of an LLC or any other entity are considered "professional" and will incur applicable recurring fees based on the "professional" rate schedule. The professional designation is determined by exchanges, not brokerages. In the past, some brokerages were willing to "challenge" professional designation on behalf of the client.

Just a couple of many things to consider.

Osorico
 
I am in a similar situation.......the thing that made the most sense to me was to find 3 or so CPAs that understand this type of tax law and see what they recommended. In the end after doing the math I did not form an LLC, but that may change if my situation changes in the upcoming future.

Meeting with several CPAs should give you a good perspective that fit your specific situation. If they bill you for their time, so be it, it should be deductible and will give you a better feeling on whether or not the person you choose knows what he/she is doing.

Also, it makes sense to fit this strategy into whatever else you have going on (i.e. other businesses you have money in, etc.). Nobody would know these type of details with the information you initially provided.

I think you may get some answers to your question on this board that may lead you down a path that wont work well for you. The tax law is generally a mess & there are a ton of gotchas in it that can catch up with you if you don't think things through properly.

Regards,
Eric
 
Quote from birdman:

...
I'll ask the guy to join this thread and give some insight on avoiding self employment tax
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Just remember, in the eyes of Uncle Sam,
there is a HUGE difference between under-reporting and avoidance.
 
Quote from birdman:



some good general and international info there - I'll ask the guy to join this thread and give some insight on avoiding self employment tax
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What exactly are you guys referring to? Capital gains are not subject to any self employment taxes.
"Gains and losses from selling securities as part of a trading business are not subject to self-employment tax. This is true whether the election is made or not."
http://www.bankrate.com/brm/itax/tax_adviser/20040826a1.asp
 
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