I'm not going to beat this death and argue here. This information comes from the IRS in a panel meeeting it had with some of the leading tax advisors in the country who specialize in Trader Tax Status. If you get audited as an individual filing for Trader Tax Status and don't have at least 500 round turns for 2008, the status will be rejected by the IRS. If you have the time and money to fight them, good luck.
Rolex trader you're already spreading bs and lies. THE IRS HAS NO SET RULES ON WHAT DEFINES A TRADER. THEY ONLY STATE IT INVOLVES SUBSTANTIAL TRADING.As i said if ones a real trader they have nothing to worry about. You're basically saying if you're really not a full time trader setup a llc and get away with it.And i'd make a pt that obama with his anti business policies will go after auditing business much more
i thought with LLC one could pay himself just enough salary to unlock retirement and health insurance benefits. the rest of the profits is passed through LLC and ends up on schedule D. i am guessing fica should not be a problem in this scenario. but i am just reading about all this stuff and don't know much.
The IRS has plenty of soft, unwritten "rules" on this but there are simply not published. They like having the freedom and latitude on this issue. And I can assure you the 500 and 75% numbers are the thresholds used going forward and that IF YOU GET AUDITED AND THE IRS DECIDES YOU DO NOT QUALIFY FOR TRADER TAX STATUS, you will pay dearly trying to convince them otherwise by not having the 500 and 75% to back up your argument. I'm not saying that if you're not a full time trader, you should have an LLC. I am saying that an LLC is less likely to receive the scrutiny that an individual will, regardless if the conditions are met. Best of luck to you who roll the dice on this. Any audit is no picnic, but one on this issue is hell.
I agree. If you're bona fide "full time" or better yet no other earned source of income then the need for an LLC is minimal. If trading is one of several things you've got going then I'd suggest you form an inexpensive to maintain, single member LLC. On a related note: the biggest chumps are the guys who think they're "beating the IRS" by making a zillion trades a year in their IRA.......