I have an extention till October 15th to file my 2006 return. 2006 was a losing year for me as was 2005. In both years I traded stocks at a prop firm (so I have a K-1). I also traded stocks and futures. My question is how much loss can I carry forward. I haven't elected mark to market accounting. Stocks: I believe you can only deduct 3k in capital losses per year. And you cannot carry foward any losses. K-1 income: Can I carry foward any losses from 2005? Futures: Can I carry foward any losses from 2006? Also I live in the NYC area so is anyone aware of a good tax accountant that is familiar with doing taxes for traders? I checked out green trader but I beleive they charge like a thousand dollars with is way out of my price range. In the event that I do my own taxes - do you guys prefer one tax software over another in regards to fileing for your trading income. I've used tax cut in the past. I really haven't paid much attention to taxes because I really wasn't making any money. But for 2007 I have a really good shot to start making money consistantly so need to read up on tax issues. Thanks.
Well I've decided to fill out the tax form myself using TurboTax. My question is this I have two K-1s from 2005. But of them record a loss. But in one K-1 the loss is recored in Box 1 of Part 3 on the form as Ordinary business income (loss). And on the other it is recorded in Box 8 as Net short-term capital gain (loss). So which K-1 is correct?
You can to carry forward. I have done it for the last 5 years for futures losses as an investor, I don't think stocks are different. I have atleast 5 years to go too. This advice came from my CPA, not trading CPA specific. The cap is 3k per year last time I checked.
The guy I used for my trading LLC is daytradertax.com. He is a good guy, Paul Mann. He's here in Denver, but does alot over the phone if you need him too. I think he is around $600 for taxes, but I use my old tax CPA for sales job, because corp tax writeoffs are not much different for traders than for a big company, except no car writeoffs really. Look up traderstatus he posts on this board sometimes, he really know his stuff.
You can file a NOL carryover. If you made money a few years ago, you can also apply losses to previous gains and refile 2004. I would only recommend a competent CPA to do this creative accounting. surdo
Also - when I'm a partner at a prop firm, am I considered to be an active or passive partner? Because different rules seem to apply. I was going to go with a tax accountant but I met with two H and R block accountants and they didn't seem to know what they were doing like I was the first trader they met. I think greencompany and trader tax charge way too much for a simple K-1 and 1099B form - besides they don't have offices in NYC. I'd like to meet someone in person learn how to do the taxes myself since ultimately I'm responsible. Turbotax is actually pretty good software.
TurboTax asked me if did I materially participate in the business in 2006. Here is there explaination of Material Participation. Material Participation You materially participate in your business if you are actively involved in the operation of your business. You materially participated if you pass any of the following tests: - You participate in the activity for more than 500 hours during the year.** - You are the only person who substantially participates in the activity , including nonowners. - You participate in the activity more than 100 hours during the year and no one else participates more than you do, including nonowners. - You participate more than 100 hours in this and other activities, and the total for all the activities is more than 500 hours. Also: - If you materially participate in a personal service activity for at least three years you are a material participant for life. Personal services include child care, consultant, real estate agent, etc - You participated in the activity on a regular, continuous, and substantial basis for more than 100 hours during the year. - If married, you can include your spouse's participation toward the 500- and 100-hour tests. Requirements: The work you performed must have been: - Done at the time you owned an interest in the activity, and - Must have been the type that an owner customarily does. Exceptions: Any hours managing the activity do not count toward material participation if: - Anyone other than you received compensation for managing the activity, or - Anyone spent more hours than you performing services in managing the activity during the year.
AVOID H&R Block like the plague, PM me if you want the name of my CPA, he is competant and reasonable. You are over your head if you are asking these questions. surdo
First off I would suggest going to an accountant. That being said. You can carry what ever net capital loss you have forward. You can only however deduct 3k of it from your earned income each year. So if you lost 10k (net from k-1's and stocks). 3k is written off and 7k carries forward. All of this should be done automatically by Turbotax. If you have a gain next year of say 7k. that gain would offset the carry of loss of 7k.
I think the answer to this question is that all income or loss on the K-1 should be recorded in Box one as Ordinary business income (loss) and NOT in box 8 as Net short-term capital gain(loss). This is how I did my 2005 return and I beleive it was correct. I disregard the box 8 entry on the incorrect K-1 and entered it in box 1 on the turbo tax k-1. Income/Losses from partnerships are treated as NOI/NOL and not capital gains/losses. Am I wrong on this?