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I missed the name of the book.
If you are not contributing to a pension fund of any kind (ira, keogh, 401k
or whatever) you can set up a keogh for yourself. Depending on your age,
you might be able to contribute to a keogh a larger amount than the 30k or
35k that the usual IRS publications mention. The way it works, is say you
are 50 and you want to retire at 65 with a certain pension, an actuary will
determine how much you need to contribute each year to meet this. The
hooker is that until recently the IRS rules required that you get a
qualified actuary to prepare your annual report, and these were not cheap.
I was told that the IRS rules were changed in 1997 and you can now do the
actuary report yourself. Better check on this as I am not sure.
If you need advice on this, do not go to the IRS, get a knowledgeable
accountant or pension plan advisor. This will cost you but it will be
better than the incorrect information that you are likely to get from the
IRS people. Some brokers will provide you with an approved (by the IRS)
plan provided you trade with them. If you decide to go to another broker,
you can take the plan with you.
You can deduct your investment operating costs like software, reference
books, advisory services, telephone etc on Sch D. I am going thru an IRS
audit and they accepted investment expenses for which I had adequate
documentation. After some discussion they reluctantly accepted credit card
statements and checks as providing documentation.
Recently someone posted to this thread that they use Sch C and Sch D for
their investment expenses and income. They said that they are audited
every year, but here the key is to have GOOD records and receipts for
everything relevant.
Another suggestion is to incorporate your trading activities. Here again
you will need competent tax and legal advice.
You should buy or borrow the complete IRS rules (2 vols). You can buy it
at a legal bookstore, order it from the Government Printing Office, order
it from the Commerce Clearing House (they are in Chicago), or look at it in
a law library.
Hope this helps.
Lionel
-----Original Message-----
From: Chuck Wemlinger <yeti@xxxxxxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Wednesday, March 10, 1999 6:21 PM
Subject: Re: Using "Trader" Status for Income Taxes
>Hi Bill,
>
>What did you think of the book? I went to Amazon to check it out and was
>suprised to see it was about $80. The readers reviews were interesting.
>Most felt it did not dedicate enough coverage the subject of taxes as it
>applies to the Trader as the title would indicate. Here is one of the
more
>interesting reviews:
>
>"This book gives a unique point of view so, it does not duplicate what you
>can get in other tax books. It advocates you try to qualify for 'Trader
>Status', and there are several Supreme Court tax cases concerning this
>difficult to qualify status. This status means that your TRADE as a
serious
>business, hold postions for generally less than a month. All your expenses
>become fully deductable on Schedule C, HOWEVER you lose Capital Gain
>treatment AND must pay Social Security and Medicare taxes on your Self
>Employment income but you can set up a pension plan and/or SEP IRA. I
think
>there is too great a danger of a nasty IRS audit, and not enough taxes
>saved. A difficult route for a Futures Trader, nearly impossible for a
Stock
>trader except for some SOES traders."
>
>My understanding of the situation is that if you show income from another
>source like a job or business, then there's little chance that you can
>convince the IRS that you're in the business of trading (even if you trade
>commodities and hold for short periods). Therefore while you show
>gains/losses on Schedule D, you cannot deduct or expense any of your
>operating costs like telephone, computers, software, etc.
>
>If you're not certified or licensed and trade only your own commodities
>account as your primary source of income are you only self-employed or are
>you in the "business of trading", and can expense or amortize your various
>expenses? I guess it's up to the individual to decide it they want to
risk
>a potential test by the IRS.
>
>-----Original Message-----
>From: Bill Coward <wrcoward@xxxxxxxxx>
>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Date: Tuesday, March 09, 1999 7:37 PM
>Subject: Re: Using "Trader" Status for Income Taxes
>
>
>>Lou,
>>
>>According to Ted Tesser, author of TRADER'S TAX SURVIVAL GUIDE, and a CPA
>>and tax accountant specializing in investment taxation, trading activity
is
>>considered to be capital gain income (or loss) and should be reported on
>>Schedule D. It should not be reported on Schedule C, the form for
>>reporting earned income from a business or trade, nor should it be
reported
>>on Schedule SE, the form for calculating self-employment tax on earned
>>income from a business or trade. He goes on to say that, since the
income
>>is not earned, no retirement plan contribution should be made against it.
>>
>>Thanks for your feedback.
>>
>>Bill
>>
>>----------
>>> From: Lou Baker <louab@xxxxxxxxxxxxx>
>>> To: metastock@xxxxxxxxxxxxx
>>> Subject: Re: Using "Trader" Status for Income Taxes
>>> Date: Tuesday, March 09, 1999 12:40 PM
>>>
>>> Bill, although not a direct answer to your question, look carefully at
>>the
>>> self-employment tax you may be liable to pay if you claim a trade or
>>> business, unless you max out on other earned income, of course. Lou
>>>
>>>
>>
>
>
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