I've seen some web pages saying it's better to incorporate (e.g. LLC) for tax purposes, even if you're only day-trading your own personal account (not anyone else's money), so that you can deduct your expenses (equipment, electricity, etc.) in your tax return. Is this true? Are there any downsides to this? Does anybody have any experience doing this? When I seek advice from a lawyer & accountant, should I be seeking out someone who specifically has experience with finance/traders, or should any lawyer & accountant do?
Assuming you qualify for trader tax status, you do not need to incorporate to be able to deduct trading expenses. Your "corporate structure" would default to a sole proprietorship using your own name (unless you wanted something more complicated).
I'd imagine as your capital base grows this could be a significant move, from the research I've done it would seem better to create an entity in one of the Anglo Alliance countries (Canada, UK, Australia). There seems to be significant roadblocks to doing this in the United States. Personally, I'm too small time to consider any of that for tax purposes, but also consider the implications that this could mean to your credit, lifestyle, and mobility. Also consider there are uses for CFD's which are not available in the US.
If 90% of your income at the end of the year is from investments, does that not automatically qualify you for trader status? Also for 2017, will the Trump tax plan be retroactive?
You can argue that in front of a Judge, but your chances of success is slim, because there is no clear cut rules that defines trader tax status. which means it is all up to the IRS guy, if he got laid the night before then you have better chance of success of getting the trader status. On the other hand, if he got rejected that night, then your ass will belong to him!
If you don't qualify for trader tax status, can you incorporate a trading business? That doesn't seem right to me, although I am not sure. You should contact greentradertax.
I've always thought that was some kind'uv loophole for traders that didn't qualify for "trader tax status" via them just incorporating. Yet, it would seem best to me to just obtain trader tax status if privacy is a big concern because you'll have less privacy if incorporated. I say this because I remember some years back a guy (a full time trader) out of Chicago that had remodeled his entire home into a trading office that included him hiring two other traders, a secretary and a part-time IT person. He posted a few videos of his home office interior and of him trading live on Youtube. It was interesting to see the home office because I've only seen "architects" do something like that...convert the entire home into an office. Very interesting.
It is not a loophole. You or anyone can start an LLC. Register with your state, get an EIN from the IRS. Create an operating agreement. Single member LLCs are considered the same to the IRS and a sole prop. You should contact an accountant or Green Trader Tax to determine if for your situation, if it is worth the extra cost for your business. I have a number of clients that have LLCs. They can write off some expenses, create a pension plan, get health insurance, etc and protect your personal assets. It is a big decision, I would not make it from information you read here,