I am a Registered Tax Preparer and think that if this is your full time occupation, then you can do it. The benefits are lots of writeoffs and you build a Social Security fund for yourself. Also, since most of your trades are short term, you are taxed at the same rate anyways. I still think you can claim the longer term cap gains rate on your longer term holdings. I have a way to do it that makes sense and if you are interested in having your taxes prepared contact me...cunningtax@excite.com TIM Registered and Bonded.
No offense, but you sound VERY unsure of yourself. The following sites should help get you up to speed. Not a complete list, just a few extemporaneous links... http://www.greencompany.com/ http://www.tradersaccounting.com/ http://www.simscpa.com/ And yes, Sched C is valid, assuming you have Trader Tax Status, and optimally (for equities), have elected MTM accounting. Osorico
Since the Mark to Market subject has been brought up.... Could a trader with MTM status move a porttion of their profits (up to the legal limit for IRAs) from their taxable trading account into an IRA account each year to reduce their taxable income? I wonder what percentage of ET posters claim the MTM status?
I am NOT an accountant, but... MTM accounting has nothing to do with IRA contributions. The qualifier for contributing into retirement accounts is SE (self-employment) tax. If you pay SE tax, you can contribute to a retirement plan, dependant on the amount the SE tax is accessed on,.and the retirement plan. Osorico [knows enough about taxes to be dangerous. Nothing more.]
The IRS rules are not concrete BUT I believe that if you truly choose Trading as your occupation, then you can qualify for a Schedule C. p.s. Is anyone 100% sure of themself in understanding the tax code? If they say yes, they are lying. Many times financial publications have taken a tax return to 50 different places and gotten 50 different answers. I would be leery of any tax adviser who claims they "know it all". Just my 2 cents.....all I can offer is complete honesty and integrity. thanks for the links......
I think you are being a bit unfair to midlifeguy. The IRS usd to take a very aggressive position against letting people use Sched C for trading profits. There are several controlling appellate court cases that made it virtually impossible to claim trader status unless you ran a securities firm. More recently, the IRS seems to have backed off a bit and the Reg's and publications don;t seem to have a problem with prop traders or day traders who go Sched C. Those cases have not been overturned to my knowledge however, and it is not prudent for a professional advisor to act like they don't exist.
midlife guy you need to go take a course on trader tax returns. with your knowledge god help anyone's retun you're doing.you're asking the most basic of questions and you're still unsure
tim i'm an expert on trader taxes. i've studied all returns from green,mann and tasser and talked to them and done my own returns 7 straight years. the only grey area is do you qualify to file as a sch c trader. the true test is if trading income is the majority and probably even 100% of your earned income and you trade full time then you can write all your expenses off. but your questions of "i think somebody who trades full time can file a sch c" or "i also think one can have a long term account for better cap gains rates" are the most elementary of questions that any tax pro should know. actually i'd go study all robert greenes material on his site as he's by far the most knowelegeble trader cpa out there
I don't think I worded it right. Anyways, thanks for the info....definitely alot to study up on. You have to be careful because the IRS has been tough on people with this classification. Take care