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Registered User
Joined: 2/8/2006
Posts: 73
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Hello All
I would like to know if any of you full time traders are trading in your own name or did you start a business and trade through the business? Many thanks.
Aslan007 
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Registered User
Joined: 4/18/2005
Posts: 4,090
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I filed for the Trader taxes.. and deduct office space from the house and all my trading related expenses but I didn't give my self a name for the business.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Really Scottnlena? As far as I know to be able to file as a business you must register the business in your clerk (county) as whatever type it is solepropietor, corpotation, partnership, etc..
And except for the solepropietor status, you must file and obtain a business identification number.
You cant' just tell the IRS you are a business because you decided to do so.
Paying taxes from your trading earned income doesn't mean you are a business.
good luck
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Registered User
Joined: 2/8/2006
Posts: 73
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Thanks Scottnlena and BigBlock
What is the Business Identification number or name for a full time trader?
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Registered User
Joined: 4/18/2005
Posts: 4,090
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Well I dunno... i discussed it with my tax guy, and just to let you know not every tax person can help you if you are an agressive trader, most think they can. Find someone who specializes in trader taxes. Most will give you an initial consultation for free, mine did. if you are really into doing your own taxes then that is fine but do your homework.
The difference, mainly between filing for trader taxes and not is the long term gains taxation. If you hold any stocks over a year then I suggest you do it in a second account. It's cleaner that way. If you apply for trader tax status it is verry difficult to get it recended. What happens is you kiss your long term gains tax rate good bye and pay the short term gains and losses rate BUT you are able to run it like a business. I do and I haven't had a problem at all. Uncle samd seems to like us having home based businesses, again i'm not a tax guy. the other up side is taht you are able to dedutc the full amount of your losses for any give year that year.
Conventional filing give you a break on longterm gains and losses but you pay a higher rate for short term gains. However if you have a loosing year you are only able to deduct a portion and a small portion for that year ... all other amounts are spread over subsequent years. That can work for you in that if following years are proffitable then you still have some left over losses to claim.
However it is the practice of MOST (as I understand) agressive traders to file for the trader tax status, because the deductions can add up. Transaction costs, office space, stationary, your computer, software, etc etc, upgrades, accounting, seminars, mileage and fuel to said seminars, trading related publications. I was able to deduct stuff I never even thought of. I supose a person could push thier luck and call all sorts of things "Investment Research" but I'd be careful there. I let the tax guy find my deductions... he actually found some stuff in my personal taxes that was wrong reguarding a trust document and found more money for me. I used a .COM service. We realy aren't suposed to advertise other websites here so google the topic. The guy I use is in NYC.
But it's up to you. I think, and I could be wrong, that trader status gives you a slightly better rate for the short term gains.
As far as bigblocks remarks I have no idea what he is talking about. it wasn't a problem for me.
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Registered User
Joined: 2/8/2006
Posts: 73
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Thanks again scottnlena. I will do some more research. Your advice is well received.
Aslan007 (&)
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Registered User
Joined: 12/19/2004
Posts: 1
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"The Tax Guide for Traders" by RA Green will help you decide if you should be a business and how to do it.
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