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Looking for tax deductions?
Short-term trading is fast… exciting… profitable… challenging… and tax deductible!
When you tally up your results each year – do you see the capital gain tax taking away too much from your hard won trading profits? As an active trader do you find that you have too little time at the end of the day to do the necessary tax planning to avoid paying excessive income taxes? What is the real story behind all the talk about the tax benefits from choosing trader status and electing mark to market?
When is a CPA firm needed?
Here at TraderStatus.com™ we will bring together in one place the information necessary to help you survive unnecessarily high short-term capital gain taxes, self-employment taxes and state and federal income taxes. To accomplish this, often a separate trading entity is the answer, but just as often we avoid it as not being cost effective in a particular situation.
Many traders do not yet even realize that they are paying far too much to the Federal Government. Existing, proven legal procedures, which in many cases can significantly reduce taxes each and every year, are available to anyone qualified to elect to use them.
As we all eventually learn, those low capital gain tax rates of 15% or lower are not available for the daytrader’s lightning fast trading profits. Rather, an individual daytrader’s gains (or losses) are subject to the higher ordinary income tax rates!
Investors and securities traders may incur substantial costs with on-line fees, commissions, real-time data-feeds, computer equipment and so on. The Internal Revenue Service, on their own, do not treat most taxpayers very fairly when it comes to deducting these expenses. Leaving it up to the IRS publications and instructions, at best, a taxpayer must first qualify to itemize his deductions on Schedule A – making those deductions subject to a 2% of Adjusted Gross Income (AGI) reduction and for some high-income taxpayers even an additional 3% of AGI reduction.
Please take the time to read and understand the information found on our web site as it can be very helpful to you when preparing your taxes and when planning your tax strategies. Every month we hear from taxpayers who found this web site too late or after they already paid someone for a download that contained nothing more than the basic information here available to you for free. Taxpayers who were ill-advised by normally very competent CPAs and other tax practitioners, but for whom the tricks and traps of Trader Status were unknown to them.
A good CPA does not need to know everything, he only needs to know where to look it up when a problem arises, or when he’s doing your tax planning. Unfortunately the hard facts are that, when it comes to traders in securities and traders in commodities, unfortunately, many tax advisors still have no clue when that there even is a Trader Status issue to look up, let alone having the practical hands-on experience necessary to be aware of the tricks and traps to be found!
Odds of being audited:
1:8 taxpayer earning over $1MM were audited in the past year. 1:25 are the odds for individuals earning greater than $200,000. 1:100 for people earning less than $200,000. 1.6MM tax returns were audited, out of 141MM form 1040 returns filed. 8 out of every 10 audits resulted in additional taxes being assessed. Corporations: 1:100 odds for those with assets under $10MM. – derived from IRS announcement, January 5, 2012
For 2014 as has been the case starting with 2011, taxpayers with any financial account maintained by a foreign financial institution or any securities issued by someone that is not a U.S. person may be required to file IRS Form 8938 along with their regular income tax forms. Taxpayers are subject to a $10,000 late filing penalty and the burden of compliance for some European institutions is too expensive and will result in closing accounts held by U.S. citizens. – derived from IRS announcements, January 2012
Help is out there for those qualifying taxpayers whom are active enough to file with the IRS as a TraderStatus™Taxpayer. Under Trader Status an electing daytrader may deduct all of his ordinary and necessary expenses. And for taxpayers filing under Trader Status they do not itemize those expenses on Schedule A (but yes, they may even take the “standard deduction” in addition to all their “trader status” expense deductions). Since a trader does not “itemize” daytrading expenses these are not subject to the 2% limitation, the 3% limitation, or many of several other restrictions the IRS places on the average investor!