Taxes for newbie traders.

Discussion in 'Taxes and Accounting' started by seasideheights, Sep 16, 2007.

  1. I file differently than what I'm going to mention but I believe I'm correct for newbie stock traders.

    If you daytrade full time with no other income, you can file form 1040, use Sched D for your trading gains, put your profession as "Trader of Securities", and if you want to avoid audit chances, don't claim any of your expenses. Your taxes would be composed of a filled out 1040 & a sched D. On the 1040 you would put 0 for the "Wages, Salaries & Tips" line on the form & put your profits on the "Capital Gains" line. You wouldn't owe self employment taxes.

    Would those guidelines help newbie traders just starting out with stock trading? Or am I incorrect.

    (Note: I'm not a tax attorney or giving advice, I'm just talking & I may be 100% wrong)

    Am I right or wrong? Is what I mentioned correct?
  2. bump
  3. I believe you are correct, I was advised by my accountant not to form a corporation for my investing/trading income. earnings are claimed as you stated short and long term capital gains, with no employment taxes. It is my understanding in an S corportation dividends are passed through to the shareholders, however, I believe the earnings must be withdrawn as income, hence, employment taxes. The only real benefit that I saw as an S-Corp was Health Insurance, This benefit must be weighed against the cost of employment taxes on an individual benefit.

    I contacted the IRS and inquired of any requirement to file as a business, since 100% of my income is derived from investing/trading; I was informed that as long as I was only investing my own money and not others, I could file as an individual investor with no requirement to file as a business.

    Same disclaimer, I am not a tax advisor, this is only my understanding for my particular situation...

    Safe trading all...
  4. What did you put as your profession on the tax form?
  5. Surdo


    Why shouldn't I deduct my office, computer, and charting expenses on a Schedule C? They are legitimate, and I have all my bills. My CPA knows what he is doing and I have never been audited.

    You are giving out BAD advice.
  6. 2006 I stated "Manager" as I had residual income from sale of my business and was consistent with previous years stated profession...
    2007 I will state "investor" as no other income is to be claimed...
  7. rwk


    This is not necessarily bad advice. The expenses mentioned are valid for someone who qualifies as a "Trader in Securities". For many of us, however, the the tax saving on Schedule C is less than the cost of having a CPA do our taxes. Claiming trader status and filing a Schecule C do appear the raise the chance of an audit, which many of us find an unnecessary complication.

    There is nothing improper about claiming trader status. But it sometimes makes sense to pass on it for those of us who like to keep our expenses down and our lives simple.
  8. Bob111


    you don't have to put profession anywhere, cause you don't have any. As for employment status- I’m unemployed for last 10 years. Here is my short term capital gain on Sch D. that's it.
    That’s how i file my taxes(doing it by myself with Tax Cut) for at least 5-7 years. on Sch D-account number, start date-beginning of the year, end-end of the year. i never file every trade, just total Pnl and that's it. keep it simple. as for deduction-you can deduct your whatever expenses, but it they have to be over certain % of your income(don't remember exact number). to be honest-there not much to deduct in this business.
    Incorporate-total bs,no benefits at all. every accountant would suggest you to do that, cause they simply looking for clients. you will be subject in many cases to double taxation, prof. data fees,SS taxes and many other things.
    not worth it imo for little retailer...
  9. I am giving out NO advice. make that clear. I stated it in my post.

    Maybe the idea of this thread is all wrong.

    My last post in this thread.
  10. Unemployed

    #10     Sep 18, 2007