In order to be able to write off expenses & NOT pay the self employment tax do you need to establish a 2 person LLC? Thanks
I attended a Woodies CCI seminar a few months back and one of the speakers was Jim Crimmins. His firm specializes in tax accounting for traders. His recommendation was a 'C' corp with an 'LLC' being the second choice. An 'S' was a no-no. His explanation for ths ranking seemed logical and reasonable and I will explore it further when my trading profits dictate. If you are interested you can access their website at: http://tradersaccounting.com/
SW, thank you for that reply. I've talked to them about that, but just wondering of getting a second opinion. Does anyone make money here on elite trader, I guess not since know one knows this
sky the answer to your question is no.you do not need to do a 2 man llc to get tax writeoffs. you only need to file your occupation as trader in securities and do a sch c. but you must be a full time trader and most of your income must come from trading in order to do a sch c. and i highly recommend doing a mtm filing with the irs as you avoid the wash rule and you can take more than the 3k maximium in capital gains loss in any one year.actually theres no need for a llc period. people will tell you you need one to make more fees. anything you can write off (outside a retirement plan or health ins) can be written off on a sch c. the reason you can't write off the above on a sch c non llc is because securities income is not earned income thus you pay no fica tax as in an llc you pay fica tax. if you need the name of one of the sharpest trader cpa's let me know.
As long as you are a full time trader you can write off expenses. And you don't pay SE taxes on gains from securities.
so you are telling me you can completely write off ALL expeneses NOT have an LLC and NOT pay the self employment tax?
Yes, but you can't put money into an IRA. Only earned income goes there. If you declare some of your income as earned (there are ways to do this), then you can donate to IRA's, etc., up to a given level, but you pay FICA on the earned portion. And, by the way, you pay both sides. A nice 15% on top of your federal and state taxes. And ya wonder why some people give up their Yank passports and head elsewhere?
If you ever have any dealings with Jim Crimmins and tradersaccounting, you will soon realize that they are not interested in helping you, they will complicate everything and get you deep into a corp just so you will be dependant on their services with high fees.
Thanks for the heads up. I assume that you have experience in dealing with them: can you cite any specific problems? It seems pretty straight-forward to set up a 'C' corp and trade through it. One question I have when acting within a corporation: do the brokers and quote services regard you as a 'professional'?