Is it just me but there is a lot of bad information being given here? First the confusion between trader status and mark-to-market, it is not the same thing. Second, the only way you can have a retirement plan is to have earned income, which means incorporation or some kind of entity and pay yourself a salary, which traps you into paying +15% Self Employment tax (if there is another way, please correct me!) I have done my own taxes for a few years and it is hard to sort it all out ... but this is an excellent document. Kudos to whoever put this together. http://docs.hamzeianalytics.com/SR_120810_Slides.pdf Some relevent excerpts - Am I Responsible For Self Employment Tax? ⢠Only on earned income. Traders are exempt from self employment and payroll taxes because the IRS views trading gains as unearned income, regardless of trader status or mark to market election. What if I trade stocks and futures contracts? ⢠You can elect mark to market for âsecurities onlyâ ⢠Enables you to keep the 60/40 tax treatment for futures gain
no..it's not just you and i'm surprized to hear so much wrong info about all this from long time ET members. http://smallbusiness.findlaw.com/st...ng-business-tax-deductions-understanding.html The "laugh" test. example with 1000$ loan wouldn't pass this one
I agree with one poster's comment that ordinary tax accountants know next to nothing about traders tax status. I find Robert Green very informative. One can actually find good examples in their guides to file your own taxes. http://www.greencompany.com/Traders/GuidesCommodites.shtml http://www.greencompany.com/Traders/Guides2010TaxGuides.shtml
i know..i know...but...DDT did mention Corporation..this mean C to me and to anyone,who have to deal with the taxes on any level above kindergarten. not LLC,not S..C..unless we are talking on some kind of different languages..i understand his idea, about playing with taxes at the time of "withdrawal", but before that (in case of C) you must pay corp tax every year. and those rates aren't funny or business friendly for really profitable trader- Taxable income over Not over Tax rate $ 0 $ 50,000 15% 50,000 75,000 25% 75,000 100,000 34% 100,000 335,000 39% 335,000 10,000,000 34% 10,000,000 15,000,000 35% 15,000,000 18,333,333 38% 18,333,333 .......... 35% http://www.smbiz.com/sbrl001.html 34% from 75K? fuck that..and this is before you put a dime in your pocket(and pay your own tax on that income)
PROMAGMA, thanks. This is an excellent link. Since i started this link I have done quite a bit of reading. Most of the people who have posted in this link, i am sorry to say, are writing based on their feelings and not facts. Thanks though for participating. The link by promagma really gives it all accurately.
one of us here is qualified to give advice in CA and FL. and even has experience converting 1099 income from an LLC to capital gains income and setting up corps. And there is no doubt setting up the corps in the past with the proper structure saved taxes. here is a quote from a website I just found. " Active income vs. passive income The rule here is whether the income is earned actively (you do or sell something) or passively (you receive rent from a property). If you're making active, or earned, income, then you'll pay more taxes than you should by operating through a sole proprietorship or through an LLC taxed as either a sole proprietorship or a partnership. " http://www.creonline.com/articles/art-303.html" I know trading may be different. And I do not remember the exact structure. but by setting up a corp, taking some of the money as salary and taking the other money out the proper way, people were able to save money over just trading on their own. If you were to go back in the archives here at et you might see some good discussions. I think the guy green used to post here as well.
Just wanted to say thanks for your explanation, as well as the link from programa, though I'm not sure a few small points in that document are accurate. Hadn't realized you could achieve so much with some proper planning. I hate this stuff, like I hate health insurance and healthcare issues. Seems it's worth it to spend much more time learning. Thanks again.
Yes there are benefits to an entity (retirement plan, deduct health insurance) ... but it didn't seem worth it to me because you are paying 15% self employment tax that is normally avoided. I am young and would rather not pay into social security. I realize that for an older person who is closer to receiving social security, and can deduct significant health insurance $$$, the extra 15% may be worth it. And there are other potential benefits, like using an entity to minimize a high state tax, minimize chance of an audit, or so you can take advantage of the foreign tax credit. I was seriously considering an entity, so correct me if I am wrong .... with an entity you are always paying the extra 15% and it may not be worth it.