Why should anyone want to file tax as a "Trader" Vs. individual? Advantages / disadva

Discussion in 'Taxes and Accounting' started by automated, Jan 4, 2011.

  1. it would be foolish to never pay into ss. every american should strive to pay in enough to at least qualify for minimum ss and medicare benifits.
     
    #21     Jan 5, 2011
  2. promagma

    promagma

    Possibly, I verified a lot of it with my own research, not from a tax pro but from other sources on the internet. But as always, don't be like me and try to do your own taxes, consult a pro :). There is actually a presentation that goes with the slides that I should have posted.

    http://marketheist.com/2010/12/16/trader-public-service-what-is-trader-tax-status-with-steve-ribble/
     
    #22     Jan 5, 2011
  3. promagma

    promagma

    Not always, the amount you receive is proportial to the amount you paid in. I actually worked a real job and paid SS tax for 20 quarters, so yeah I have considered going for the minimum 40 quarters. I wouldn't get much, but at least I could probably get back what I paid in (depending on how long I live and assuming SS is still around in 40 years).
     
    #23     Jan 5, 2011
  4. drm7

    drm7

    What about the treatment for capital losses? The way I understand it, you can only deduct $3,000/year (rolling over the excess) of capital losses as a non-trader. As a professional, you can net out your gains and losses, and be taxed on the profits.

    Example:

    $500,000 gross gains
    $250,000 gross losses
    All gains/losses are short-term

    Non-trader
    $500,000 taxed at 35% = $325,000 gross after tax gains
    $325,000 after tax gains - $250,000 losses + $3,000 yearly deduction = $78,000 net gains after tax.

    Trader
    $500,000 - $250,000 = $250,000 net gains before tax
    $250,000 taxed at 35% = $162,500 net gains after tax (not to mention wash sales, etc.)

    Is this calculation correct? If correct, does it also apply to futures gains/losses (i.e., the $3,000 limit)?
     
    #24     Jan 5, 2011
  5. no actually it is not. if you meet minimum standards you can recieve ss for life.
     
    #25     Jan 5, 2011
  6. does not compute
     
    #26     Jan 5, 2011
  7. promagma

    promagma

    Unless you are dealing with carryover losses, it all goes in the same bucket so it's not that complicated ...

    http://invest-faq.com/articles/tax-cap-gains-rates.html
     
    #27     Jan 5, 2011
  8. drm7

    drm7

    OK, so you can net your gross gains and losses every year to compute your tax (notwithstanding short/long term treatment issues), even if you are a non-pro?
     
    #28     Jan 5, 2011
  9. promagma

    promagma

    Ah thanks I stand corrected .... it is biased toward people who earn a low salary or didn't work for many years. I did the calculation and if I work for 4 more years to meet the minimum, I would get $970/month, a lot more than what I put in.

    Dang it, does this mean I have to get a job :D
     
    #29     Jan 5, 2011
  10. yep. the only real advantage of pro status is a few expense deductions and the ability to use nol. avoiding wash sales calculations if mtm is nice too.
     
    #30     Jan 5, 2011