I started Trading again in March, Day Trading in April of this year. I Day Traded over 10 years ago for a bit, but real life did not allow much time for it. I have traded some in my IRA over the years. Being at home, and taking care of my 86 year old mother who has health issues, I was looking for something to do. I liked trading for myself when I did it, so I decided to try it. I researched on the internet and have read some books, Trading in the Zone, Short Term Trading in the New Stock Market, and The Logical Trader. I decided to start an LLC in North Carolina where I reside. It seemed this would protect me and the Trading business, as well as make it easier to claim Trader Status. This was formed via filling out the application on the NC Secretary of State site, and paying the filing fees. I have amended the filing with a letter of Resolution for Mark to Market Accounting, and an LLC Operating Agreement stating the business was created to Actively Trade Equities for the purpose of profiting from the short term price fluctuations of the equity prices. This will be a pass through company using my SS#. I filed a statement with the IRS before April 25th of this year, stating that I am making an election under section 475(f), for tax year 2020, for Mark to Market Accounting. I did this as I traded a bit before the LLC was ready. I am using Fidelity and using Active Trader Pro for trading currently. I started day trading again around mid April in my Personal account there, and transferred all money to an LLC Business Account at Fidelity after I got the Approved paperwork on the LLC form the State. I also started a new business bank account for the LLC locally. I am started out slowly, though working many hours a day to begin with, making on average about $250.00 US per day. I was wondering if this type of Business set up is working for others? I thought about possibly getting a separate EIN for the business, but see no reason as I am the only member and it would be treated as a pass through anyway. For accounting, since I have the LLC and can deduct business expenses this way, but otherwise the business is not complicated, would Quicken Home and Business be enough? Since I am now doing Mark to Market accounting (I am trading what would be annually approximately 4000 to 6000 trades, and see no reasons for not satisfy Active Trader Status), I am assuming that stock trades could be accounted for as Ordinary Income and Expenses, basically like Inventory. Is Turbo Tax Premier or Home and Business fine for doing the Business Taxes for a Trading Business? I read it can handle 475 (f). I currently keep track of my trades daily by entering the time and sales on an Excel (well LibreOffice) spreadsheet, in a format that Tradelog supports, if I may need to use them. I am doing this now as a learning tool, to see what I maybe should have done, or can do better. I am entering time stamps for trades and also entering the trades on the spreadsheet as they occurred. Since I filed for MTM account with the IRS and made a resolution to the LLC for it, I am assuming all wash sales will not apply to me, and all trades will be looked at as business gains and losses. Since I filed 475 (f) status with the IRS do I need to worry about wash sales being made in my IRA? When Trading, I am just following what seems to be Institutional Traders moving stocks, and going to cash at the end of the day. I plan on talking to a local CPA soon, but have not since this Covid Virus thing happened. Any feed back and suggestions are welcome! Thanks in advance!
To be honest please talk to a CPA specializing in trading. You will not get actionable advice here. People may offer their advice, but that advice isn't admissible in a court if you are sued/the irs takes action against you. Sorry, I don't think anyone but a CPA can help you. You can find many CPAs locally on yelp who will happily take you through email or call.
Hi. I just wanted to wish you the best luck. I have been thinking about something similar but have not acted on anything concrete yet. Keep us updated I will bookmark this page.
I would have consulted https://greentradertax.com/ first or a similar tax expert. I have also never heard anyone not request an EIN# from the IRS even for a single-member LLC for their business. Lime Brokerage LLC is not affiliated with this service providers. Data, information, and material (“content”) is provided for informational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer nor recommend any of the services provided and any service used to execute any trading strategies are solely based on the independent analysis of the user.
I’ve been a mtm trader since 1999. I saw no advantage of a llc as far as writing expenses off . As far as turbo tax or whatever that has no relevance as I’ve been doing 1 line accounting since 1999. You trade in your designated day trading accounts . Have your balance on Jan 1st and your balance on dec 31st minus all withdrawals .Thats your profit for the yr .i started off using Green for a few yrs and then started doing myself . To pay $1500 a yr for something easy to do is crazy . If you feel better using a local CPA the buy Greens sample returns and give it to them . What you do need is the 2-3 pages of notes explaining that are attached to the return explaining what a mtm trader is and explaining some other things
Tracking your trades is the broker's job. If they cannot provide you with all the documents you need for tax purposes, time to find a new broker. I would probably kill myself if I had to enter every trade into excel. Be careful that your deductions are fully legitimate. I don't expect you will be able to deduct much as a day trader. As a passthrough entity I think the main benefit of an LLC is the limited liability.
Yes not a ton of legit write offs . . Main advantage for some might be no $3k limit of yearly loses as you can write your full loses off .
a) Buy a copy of GreenTrader's Tax guide, only $53 to download https://greentradertax.com/store/green-trader-tax-guide/ ; it will answer many of your questions b) As someone else stated, tracking your trades is your broker's job, and is far more accurate than your manual steps. If you don't like your broker's reports, download their trade report to a CSV file, and use an Excel spreadsheet to convert their CSV into your preferred format.
Thanks for the input! This article explains the deductions very basically https://www.tradersaccounting.com/2020/02/13/four-tax-deductions-for-traders/. The Liability Protection and potential protection of assets was a goal.
TY for that information link, I had seen it before, but was distracted into a tangent and forgot about it. I will buy that now! The information about "Our 2020 guide covers the 2017 Tax Cuts and Jobs Act’s impact on investors, traders, and investment managers" alone is worth the cost. In Regards to the Broker Reports, I can download a CSV file for trades from Fidelity. I can print, and maybe download (need to look at that) a daily Time and Sales log from the Active Trader Pro platform that gives an actual trade time stamp in a 00:00:00 format. This disapears when they update nightly. All that is available from the Broker, that I have found is a History with Daily trades, ordered from when they occurred, but no time stamp. I don't think I need a time stamp, but i am using it currently as a learning tool for my trading.