Absolutely not. You are likely confusing discussions about corporations with discussions about a trader or dealer using the mark-to-market method of accounting for tax purposes.
What are the benefits from starting a corporation
- Thread starter piks93
- Start date
Possibly... and please let us know of any broker that is stupid enough to not require a personal guarantee of the entity's debts.
As individual (sole proprietor) trader, how do you deduct medical insurance and/or fund and gain tax benefit from retirement accounts? My understanding you MUST pay SE tax before these benefits are available.
IMO, if you are paying SE on 100% of your trading gains you are either a dealer (not a sole proprietor), OR you will be noticeably better off using an entity.
Cheers
Individuals can now write off close to 90% of their medical insurance. as far as retirement accounts, your right, you can't contiribute as a individual. but you cant contiribute as a entity either unless you pay yourself a wage which is far more expensive with fica etc as opposed to the greater tax rates afforded futures traders. (60/40). so 6 of this or 1/2 dozen of that, the irs has everything figured out that no one really gets an advantage.
writing off medical expense for individuals, as you describe, is news to me. I Will look into that.
As for funding retirement, regardless of futures tax treatment or not, taxes is not nearly as significant as you suggest using a single member LLC. While correct the entity can't contribute, the administrator of the entity can. Requires filing 2 sched C... 1 for the SMLLC and 1 for the admin. And remember too, SE taxes are at least partially deductible too. It just requires planning ahead.
cheers
remember i said medical insurance, not medical expense. also want to clarify one other thing and maybe i mis understood but NOBODY can make a retirement contribution on your behalf unless you have received a wage from that entity. the contribution is tied to the wage you get paid. if i misunderstood what you said, sorry.
First of all you pretty much have to be day trading full time for the IRS to consider you as a trader. If you aren't they will consider you an investor instead of a trader and you won't be able to take any deductions. If you open a corporation, you don't have to worry about this. You are much more likely to be audited if you claim trader status. The audit rate for corporations is also much lower than it is for individuals.
http://www.accountantsworld.com/DesktopDefault.aspx?page=newspage&category=story&faid=416
http://daytrading.about.com/cs/educationtraining/a/tax.htm
With a corporation you can set up medical and retirement plans. You can choose to have your corporate meetings with your family (who are on the board of directors) in Hawaii and have the corporation cover a lot of the cost. How's that for a deduction.
If you protect all your assets with LLCs it will make them unattractive and legally unreachable by creditors. A personal guarantee is no good if the person guaranteeing it doesn't have any assets that can be encumbered. They can try to encumber your LLC but only a stupid lawyer would try this. If they get your LLC they can't force you to liquidate it so they get nothing out of it. Here is my favorite part, if you are making a profit through the LLC they get stuck with the tax bill lol. This is all assuming you have it set up right.
Are Investment Losses Deductible?
Your maximum allowable net capital loss deduction for any tax year is $3,000. If you have a net capital loss on your Schedule D greater than $3,000 you will have to carry over the remaining balance until it is used up. In contrast, traders who have selected the Mark to Market method of accounting can write off the entire loss in one year. In fact, the loss can be applied to taxable income in prior years and generate a tax refund!
http://www.tradersaccounting.com/investortax.asp
Any of my statements are made under the assumptions of trader status. I have filed as trader status from the beginning. but
i trade futures and i profit from short term changes in the daily market.
but its a dangerous assumption to think you can hide behind an entity to keep from being auditied and automatically claim trader status. just remember, all of the pass through entities, the informational returns are filed on your personal tax returns and paid by you personally at your tax rate (except futures). I would be very cautious about anybody who is an investor choose mark to market. so most of us are bound by the $3000 deduction and use the loss carry forward. trader status futures traders can have a losing year and go back and re capture taxes from profitable years i think three years. i can't remember as i haven't used that feature lately.
i trade futures and i profit from short term changes in the daily market.
but its a dangerous assumption to think you can hide behind an entity to keep from being auditied and automatically claim trader status. just remember, all of the pass through entities, the informational returns are filed on your personal tax returns and paid by you personally at your tax rate (except futures). I would be very cautious about anybody who is an investor choose mark to market. so most of us are bound by the $3000 deduction and use the loss carry forward. trader status futures traders can have a losing year and go back and re capture taxes from profitable years i think three years. i can't remember as i haven't used that feature lately.