Tax Questions

sportmatt37 · Dec 26, 2005

Hello All -

This is my first year trading with serious money, so I had some tax questions as we near the end of the year. I was wondering if any of you knew any tricks to get around or possibly write off a portion of the tax I owe. I made about 5000 dollars and have 50000 of capital. Does anyone know how much I would owe or if I would be able to write it off somehow? Thanks a lot.

RunTrade · Dec 26, 2005

Quote from sportmatt37:

Hello All -

This is my first year trading with serious money, so I had some tax questions as we near the end of the year. I was wondering if any of you knew any tricks to get around or possibly write off a portion of the tax I owe. I made about 5000 dollars and have 50000 of capital. Does anyone know how much I would owe or if I would be able to write it off somehow? Thanks a lot.

Call up the IRS and get the yearly income tax book (dont remember their official name for it). Use it to figure out what you have done that can be deducted through itemization and credit(s).

RT

Free Thinker · Dec 26, 2005

Quote from sportmatt37:

Hello All -

This is my first year trading with serious money, so I had some tax questions as we near the end of the year. I was wondering if any of you knew any tricks to get around or possibly write off a portion of the tax I owe. I made about 5000 dollars and have 50000 of capital. Does anyone know how much I would owe or if I would be able to write it off somehow? Thanks a lot.

not enough info. is 5000 all you made this year? any other income? you may owe nothing.

http://www.turbotax.com/
you can go here. they have a tax estimator.

Surdo · Dec 26, 2005

I am sure you incurred at least $5000 worth of "trading related expenses".

Computer Hardware/Software
High Speed Internet
Cable TV
Margin Expense
Charts/Data
WSJ/ Other subs
Books

Do yourself a favor, hire a good CPA and save more than the fee he charges and write that off as well!

el Surdo

traderstatus · Dec 26, 2005

Quote from sportmatt37:I made about 5000 dollars. Does anyone know how much I would owe or if I would be able to write it off somehow?

First off is to know what tax bracket you are in. If the family earnings for the year are $5,000 then you have little tax-wise to worry about.

Assuming the family has additional income, then the next step is to determine of you can file with trader status, or if you meet the IRS description of an investor.

Assuming you qualify for trader status, then all your business related costs should be tallied up for inclusion on your tax return. You might eliminate the whole $5,000 (or more) with trader status deductions.

To see is you might qualify for trader status, go to Google and type in "am i a trader"

peilthetraveler · Dec 27, 2005

If you made less than $7k for 2005 then you dont even have to file a tax return. Keep in mind thats total income from all sources.

Surdo · Dec 27, 2005

Peil:

I am not a CPA, are you?

You still have to file even if your liability is zero.
I assume he made a few stock sales, these have to be reconciled to show a cost basis.

A standard deduction is $6,250K, plus $3200 for 1 exemption, if we file he may even have NOL carryover vs next years profit.

Great advice to not file!

el Surdo

dandxg · Dec 27, 2005

Do yourself a favor, call daytradertax.com, his name is Paul Mann. I have looked at everyone and I think he is the best. Consider trading under an LLC or S corp next year, you get many more tax advantages. I am sorry, but it would take me a couple of pages to go through the added rightoffs perks or trading under an LLC or S corp. The biggest one is if you have a losing year, you aren't held to 3k deduction, you can deduct everything against your regular income, very good for part time traders.

sportmatt37 · Dec 27, 2005

thanks for all your help everyone.

Free Thinker · Dec 27, 2005

Quote from dandxg:

Do yourself a favor, call daytradertax.com, his name is Paul Mann. I have looked at everyone and I think he is the best. Consider trading under an LLC or S corp next year, you get many more tax advantages. I am sorry, but it would take me a couple of pages to go through the added rightoffs perks or trading under an LLC or S corp. The biggest one is if you have a losing year, you aren't held to 3k deduction, you can deduct everything against your regular income, very good for part time traders.

you want him to go through all the expense and paperwork of setting up a corp and he only made 5000? that is overkill. seems like he should figure out if he can make consistant money first. you have to be able to make a higher level of income to make that hassle worthwhile. he can get more than enough deductions with a simple trader status declaration and that costs nothing to do.