90% of prop shops give k-1's. you sign papers to become a b class non voting member of the llc and get a k-1. ask don bright he'll explain it. as i said everything i printed from green and co's website is law period. its not maybe or this are that its law. green is on every tv show and print publication on earth and is the leader on all trader taxes. fist of all understand the laws. 475 mark to market accounting means one must mark to market all trades at year end wether a loss or gain and pay taxes on it even if you don't sell. example is i'm in 10k ibm at $115 and it closes year end at $120 which means i have a tax gain of $50k. my cost basis then becomes $120 on ibm stock. the only people that pay fica taxes on stock sales are dealers like market makers that carry inventory and if you incorporate you pay fica when you withdraw.but the good thing is one can segregate accounts and say 1 account is long term subject to the better long term rates and one is short term and mtm accounting. i assure you all i've said today is the law. go to a few sites like tradertaxes.com and read up on it
Self employed full time traders
- Thread starter polpolik
- Start date
Quote from polpolik:
Last year, I reported some income tax while claiming self-employment and I believe I had to pay social security but that was not from trading, but from some IT consulting work I did for a company.
This year, my income has been solely from trading futures. Based on not4kids' post, I can choose not to be "self-employed" nor be an LLC and just pay my taxes based on futures capital gains rule, correct? Pretty much like being unemployed and just trading to get income. I only do futures so I don't need the mark-to-market status. I do like the idea of an LLC to seem legitimate for when I borrow money from the bank since I plan to start another business unrelated to trading some day.
I don't mind not being able to deduct my expenses since I don't spend too much for my "business" anyways and I doubt I spent over 2% of my income in expenses unless rent, utilities, gas and food is counted which I doubt (or am I wrong)?
I'll check out greencompany and try to talk to some accountant in a few weeks and get all this clarified.
I'm beginning to think one of you guys who posted will be in trouble when you get audited since we're getting conflicting information here
to THE-BEAKER: I'm not being a prick to anyone except to BNB.
Well, I've been audited 3 times. Mostly for verification of business expenses. It was a pain in the ass at first but very educational.
Definitely see an accountant. The 60/40 tax is a huge plus for traders.
I did not use footnotes, but it was really not a big problem. An IRS examiner sent me two letters stating I owed SE taxes for 2004 and 2005. I replied that I was a full time trader and referenced publication 550, and they agreed that SE taxes did not apply.
Just make sure that gains/losses are reported on Form 4797, and expenses on a Schedule C.
vectors101
Guest
pay $500 and get opinion from a tax accountand who specialize in securities trading.
i won't divulge any tax advice here. the tax man could be reading here.
i won't divulge any tax advice here. the tax man could be reading here.
vectors101
Guest
call a lawyer if the tax man threatens you are gives a hard time.
John12 is correct... no wonder so many "traders" lose!
If you PROPERLY elect the MTM accounting method (not necessary for futures-only trading) AND can pass the open to interpretation and to some degree arbitrary definition of "trader status", you are not required to pay SE (self-employment) taxes, which as of now, is 15.3% (12.4% Social Security tax and 2.9% for Medicare tax). Net earnings subject to Social Security tax are $94,200. For Medicare tax, all net earnings are subject.
As a futures-only business, I use a de facto partnership, comprised of myself and spouse. This type of entity is recognized by all 50 states, WITHOUT entity paperwork (put another way, *I* am not aware of any state that does not recognize the husband-wife partnership, or any state that requires paperwork to consummate such partnership entity).
There are 2 primary IRS validity tests for such structure... accounts titled in both names, and active participation by both parties. 50/50 participation is not required, but active participation by both parties is necessary.
We file form 6781 to report gains/losses, form 1065 for partnership income/expense, and joint 1040 based on the above
No deductions can be made by the default structure for health insurance, retirement accounts, or any other expense based on SE tax being paid.
Before forming a business entity such as an LLC or corporation, or even just becoming an exchange member, be sure to "accurately" weigh advantages... 15.3% SE tax (in addition to Federal, State, City, etc) must be offset either by cost of doing business savings and/or additional deductible expenses. And don't forget added costs of maintaining the entity (lawyers, accountants, state fees, time required, etc), professional-based fees and business expenses, and complication of modifying a business plan.
Osorico
If you PROPERLY elect the MTM accounting method (not necessary for futures-only trading) AND can pass the open to interpretation and to some degree arbitrary definition of "trader status", you are not required to pay SE (self-employment) taxes, which as of now, is 15.3% (12.4% Social Security tax and 2.9% for Medicare tax). Net earnings subject to Social Security tax are $94,200. For Medicare tax, all net earnings are subject.
As a futures-only business, I use a de facto partnership, comprised of myself and spouse. This type of entity is recognized by all 50 states, WITHOUT entity paperwork (put another way, *I* am not aware of any state that does not recognize the husband-wife partnership, or any state that requires paperwork to consummate such partnership entity).
There are 2 primary IRS validity tests for such structure... accounts titled in both names, and active participation by both parties. 50/50 participation is not required, but active participation by both parties is necessary.
We file form 6781 to report gains/losses, form 1065 for partnership income/expense, and joint 1040 based on the above
No deductions can be made by the default structure for health insurance, retirement accounts, or any other expense based on SE tax being paid.
Before forming a business entity such as an LLC or corporation, or even just becoming an exchange member, be sure to "accurately" weigh advantages... 15.3% SE tax (in addition to Federal, State, City, etc) must be offset either by cost of doing business savings and/or additional deductible expenses. And don't forget added costs of maintaining the entity (lawyers, accountants, state fees, time required, etc), professional-based fees and business expenses, and complication of modifying a business plan.
Osorico