Taxes and scalping ES

Discussion in 'Taxes and Accounting' started by Runquick, May 8, 2009.

  1. Runquick

    Runquick

    I am looking at scalping S&P emini futures regularly and wondered how it works taxwise with the brokerage commissions and fees directly associated with the trades.

    I've been averaging ABOUT 50 round trips per day (10-15 contracts per scalp) so the fees/commissions add up quick.

    Am I taxed on the GROSS profit or can you offset the gross profit by deducting the fees/commisisons from that gross amount and pay the taxes on the amount net of fees/commissions?

    Of course the next question is should I be setting up a single member LLC to do this trading?

    I know that the info I am providing is limited so I am not looking forward to an in depth answer, just a rough idea so I can see if this makes any sense (taxwise only, not trading-wise!).

    Thanks!
     
  2. Can I ask one simple question.?...bearing in mind nobody knows who you are ...and vice versa...

    How much working capital did you start with?
     
  3. Runquick

    Runquick

    About $100,000 to start.
     
  4. Surdo

    Surdo

    You are taxed on the net amount, after commissions. Subtract your balance in the account on 12/31 from the balance on 1/1, and enter it on IRS form 6781.

    Hopefully it's a positive number!

    PS: You might want to GOOGLE taxation of 1256 contracts before you flip your next 15 lot, what a joke.
     
  5. Income taxes are on net profits not gross profits. Take at look at Form 6781 and Schedule D for detailed information.

    If you are doing 500+ RTs a day you should look into leasing an IOM seat. Current IOM seat leases run $2200 a month. If you do lease a seat your net profits will be subject to SE FICA tax in addition to income tax.