Whether you want to trade in your retirement plan, build it up with annual tax-deductible contributions, borrow money from it to start a trading business, convert it to a Roth IRA for permanent tax-free build-up or take early withdrawals with fewer tax pitfalls, we can help you accomplish your goals.

January 2014 major strategy update: Based on new IRS guidance on self-employment expenses for trading businesses, we've revised our entity and retirement plan strategies. Two-spouse general partnerships may want the active trader spouse to own a minority percentage in order to maximize the retirement plan deduction in relation to the administration fee needed. (Previously, it didn't matter if the active trader spouse owned a large majority.) We also recommend S-Corps using payroll and entity-level retirement plans and adding a C-Corp to the mix for employee-benefit plans including retirement plans. In both those cases, ownership percentages don't matter. Read our Jan. 14, 2014 blog "New IRS guidance on SE tax deductions affects partnership AGI-deduction strategies."

Generally, the best retirement plan choice for business traders is an Individual 401(k) plan.
It combines a 100% AGI-deductible "elective deferral" contribution of $17,500 (for 2013) with a 20% AGI-deductible profit sharing plan contribution. There is also a "catch up provision" of $5,500 for taxpayers age 50 and over. As a "qualified plan," an Individual 401(k) allows plan loans, whereas an IRA does not. Many leading brokers offer Individual 401(k) plans on a cookie-cutter basis (which means "free" to you) and they allow active direct-access trading. Stay clear of trying to open a margin account for securities trading, as that can trigger a prohibited transaction problem. Learn more about the Individual 401(k) plan and how it compares to other choices in our Trader Tax Center and Green's 2014 Trader Tax Guide (Chapter 8). You can save $2,000 to $17,000 or more, so it pays to educate yourself.

Learn the DOs and DON’Ts of using IRAs and other retirement plans in trading activities and alternative investments: Blog (July 24, 2013) and Webinar recording (July 30, 2013). We've been warning our clients to watch out for self-dealing issues since 2000.

  • Alert! Many traders may be triggering IRS excise-tax penalties for prohibited transactions including self-dealing and/or UBIT taxes by using their IRAs and other retirement funds to finance their trading activities and alternative investments. One example of this type of trouble may be the IRA-owned LLC or trust trading account. In many cases, traders also risk losing tax-exempt status on their retirement plans. This content is a serious warning to stay clear of trouble — not just a technical discussion of quirky rules.

Roth IRA conversions (see Webinars at year-end 2012). At year-end 2012, we recommended a Roth IRA conversion for taxpayers in the top individual tax bracket to report conversion income at lower Bush-era tax rates of 35%, before top tax rates moved up to 39.6% (or 44% when you factor in the Medicare surtax on unearned income) in 2013. Roth IRA conversions are also good for taxpayers during a low income or negative income year.

Watch our videos on retirement plans produced by

In prior content (July 2009), we recommended working with intermediary administration firms to form an Individual 401(k) plan if your broker didn't offer one. Intermediary administration firms use a trust account to open with a broker. The trust, a disregarded entity, was owned by the Individual 401(k). We've heard recent reports that some intermediary administration firms have gone overboard using trust accounts inappropriately. We advise against getting involved with IRA-owned LLCs and trusts used for margin accounts on securities.

Consider a retirement-plan consultation with Robert Green, CPA or our employee benefit and retirement plan attorney.

GreenTraderTax offers numerous educational resources and consulting services to traders on setting up and utilizing existing retirement plans in a tax-advantaged manner. Whether you want to:

* actively trade (securities, futures or forex) and/or make alternative investments directly within your retirement plans;
* avoid prohibited transactions including self-dealing and UBIT issues;
* build up your retirement funds with high annual tax-deductible contributions;
* borrow up to $50,000 from a qualified plan (note: IRAs do not qualify) to help start a trading business entity with trader tax status (or for any other reason);
* convert your traditional IRA or qualified plan to a Roth IRA or Individual 401(k) Roth for permanent tax-free build-up (the income threshold was removed in 2010, and for all later years);
* take early withdrawals with fewer tax pitfalls (no 10% excise tax on substantially equal periodic payments);
* consider more innovative structures like ROBS as discussed in our July 2013 blog;
* avoid IRA-Owned LLCs and margined trust accounts;
we can help you accomplish your goals.

There are many nuances, complexities and tax pitfalls (excise taxes on prohibited transactions and more) with retirement plans, and it’s even more nuanced when you factor in special tax matters (such as trader tax status) for business traders vs. investors. As a leading CPA firm for traders, we provide many different strategies for using retirement plan assets efficiently, and you will be pleased! Retirement plan trading doesn't count toward trader tax status qualification.

We help you in a variety of ways with the retirement plan options, features (such as loan provisions), IRS and other DOL & ERISA rules and compliance, trader tax status, entities, tax-deductible retirement-plan contribution options, Roth conversions and much more. Consult with us to determine your individual retirement plan options and on plan set up as well. We also prepare annual tax Form 5500s when needed, and form your entities and prepare your annual income tax returns as you like.

If you have any questions on retirement plans, email us at or call us.

Highlighted Recent Recordings:

*Entities & Employee-Benefit Plans
*Current Developments in Tax Law that Affect Traders
*Accounting for Traders
*The Section 1256 club is hard to get into: Futures on foreign exchanges often donít qualify
*Puerto Ricoís tax haven status
*Entities: A key update on trading entities and management companies
* 2013 Tax Filings For Traders & 2014 Tax Planning
*Forex Tax Treatment & Planning
*Trader Tax Law Update: Current Developments
*2014 Tax Planning & Will an Entity Help Lower Your Tax Bill?
*Audits of Performance Records

New Website

Trader Tax Center

Tax Newsletter & Calculators

Highlights (see the full archive):

Aug 19: Foreign partners in a U.S. trading partnership can be tax free Read More

Aug 13: IRS warns Section 475 traders Read More

June 20: Tax treatment for Nadex binary options Read More

June 19: IRS softens its stance for some taxpayers with undeclared offshore accounts Read More

June 12: IRA rollover rule changes Read More

June 6: Bitcoin is not reported on 2013 FBARs Read More

June 5: Tax deadlines in June: U.S. residents abroad and FBAR Read More

June 2: Tax treatment for foreign futures Read More

May 21: Bitcoin tax update: Can business traders apply Section 475 elections to bitcoin trades? Read More

May 13: Puerto Ricoís tax haven status is tailor made for investors, traders and investment managers Read More

May 6: Entities: A key update on trading entities and management companies Read More

Mar 25: IRS guidance on bitcoin transactions will chill its use Read More

Feb 27: Another trader tax court loss (Assaderaghi) Read More

Feb 1: Net investment tax details Read More

Dec 4: IRS final regulations for Net Investment Tax help traders. Read More

Dec 3: Bitcoin is a hot commodity, but is it taxed like commodities, assets, or currencies? Read More

Nov 15: Another non-business trader gets busted in tax court trying to cheat the IRS. Read More

Nov 6: Hedge fund investors depend on ďassuranceĒ from quality independent CPA firms. Read More

Oct 29: ObamaCare taxes are starting to affect traders. Read More

Aug 30: The Tax Court Was Right To Deny Endicott Trader Tax Status Read More

Aug 18: Common trader tax mistakes Read More

July 24: Learn the DOs and DONíTs of using IRAs and other retirement plans in trading activities and alternative investments Read More

GreenTrader blog archive, Forbes blog, Benzinga blog.


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