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Recordings:
Botched 1099-Bs & Form 8949
Learn How To Use TradeLog to Deal with Cost-Basis Reporting
Forex Traders: 2011 Taxes
Trader Tax Tips & Investment Management
Launching an Incubator Hedge Fund
| EDUCATION
CENTER Proprietary traders have special tax preparation needs too. They are significantly different from retail traders. Proprietary traders don’t trade their own capital. They trade the proprietary trading firm’s capital, usually accessed from a subtrading account within the firm dedicated to a particular prop trader. A prop trader becomes associated with a prop trading firm either as an LLC member (limited ownership, receiving a Schedule K-1) — the preferred method by regulators — an independent contractor (1099-Misc) or as employee (W-2). PROP TRADING TAX MATTERS Firms don’t issue 1099s to losing IC traders, since they don’t pay them fees. Losing IC traders are still working, so they’re entitled to file a Schedule C, which will report expenses only. It will be a red flag to the IRS, so consider consulting with a trader tax expert about it first. TAXES AND LEGAL ISSUES FOR LLC MEMBERS WITH K-1S A few prop trading firms allow LLC member traders to form a 100-percent owned entity and then the trader can create some earned income. That may be the only way to get those valuable AGI deductions. PROP TRADERS’ EXPENSES Some prop trading firms have an “Accountable Reimbursement Plan” and the prop trader needs to “use it or lose it” before year end. If your firm doesn’t have such a plan, then you can deduct your own trading business expenses outside of the firm, including your home office as Unreimbursed Partnership Expenses (UPE). WRITING OFF LOST DEPOSITS For an IC trader, the lost deposit is not reflected on the annual Form 1099-Misc. When the deposit loss is realized, the IC trader can deduct a business bad debt on Schedule C, as another ordinary and necessary trade or business expense. If an LLC member prop trader has a lost deposit, he deducts the deposit as UPE on Schedule E. This is an excerpt from Green’s
2012 Trader Tax Guide • Copyright © 2012 |
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Recordings:
Botched 1099-Bs & Form 8949
Learn How To Use TradeLog to Deal with Cost-Basis Reporting
Forex Traders: 2011 Taxes
Trader Tax Tips & Investment Management
Launching an Incubator Hedge Fund
Highlights:
May 10: European politics and FTT Read more
May 8: Real estate tax mini-shelters could turn economy Read more
Apr. 12. IRS issues tax guidance on MF Global missing customer funds Read
more
Apr. 4. The MF Global Tax Trap & How to Handle 2011 Tax Extensions Read
more
Mar. 29. Extensions: Some traders may qualify for IRS penalty relief Read more
Mar. 28. See smoking guns on botched 1099-Bs in our Webinar recording Read more
Mar. 26. Petition: Securities Traders Need Tax Relief on IRS Cost-Basis Reporting Rules Read more
Mar. 20. Brokers are only reporting potential
wash sales, not final wash sales Read
more
Mar. 20. IRS, why force taxpayers to reconcile
1099-Bs to tax returns? Read
more
Mar. 15. Please IRS, don’t match tax returns with new cost-basis
1099-Bs...Read
more
Mar. 10. Big Concerns with Botched 1099-Bs and Discrepancies on Form
8949 ...Read
more
Feb. 2. Cost-Basis Reporting Is a Nightmare and FATCA Makes the IRS
a FATCAT...Read
more
Jan. 26. The Buffett Rule is Bad Tax Policy, Keep Lower Long Term Capital
Gains Rates...Read
more
Aug. 1. How
will active traders make out with coming tax changes?...Read
more
July 12. Are lower 60/40 tax rates on futures in
jeopardy? ...Read
more
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