New Traders

New traders, you’ve come to the right place to learn about taxes, accounting, regulation and business matters.

The first order of business for new traders is your transition process. Perhaps you recently left a job or business, or you’re preparing to do so. Perhaps you are unsatisfied in retirement. Trading may or may not be right for you. Some new traders delve into it with success, while others test the waters first. Do what’s best for you and your family.

Tax strategies are a huge factor in a trading activity. The goal is to deduct all trading losses and expenses as ordinary business losses, and to reduce taxes on trading gains and portfolio income with lower tax rates, like the 60/40 futures tax rates. An entity often comes in handy too. It looks better to the IRS and unlocks additional tax-deduction breaks like retirement plans and health insurance premiums. Beware of one of the biggest mistakes for new traders: Falling for a multi-entity scheme offered from other trader tax sites and tax-free state incorporators. Look here before you leap!

We recognize that many new traders first take educational classes, and some teachers highly recommend a trading entity from the start. While that is a good idea for some, it’s not a good idea for others. Almost all the leading trading education companies recommend our site.

Our recommendations for new traders:

Read the content in our free Trader Tax Center. This area contains excerpts from Green’s 2011 Trader Tax Guide, and Green wrote the book on trader tax. If nothing else, make sure to read the chapters on trader tax status, trading business expenses and entities.

Pre-Business Education Expenses: One of the biggest challenges for new traders is how to handle their recent and current trading education expenses. Some tax firms — and notice they are not CPA firms — promise full tax deductions for education, no matter how old and how high the amount. They are very wrong. Read our 2010 three-part blog series exposing these dual-entity and education deduction schemes.

Mar 03 10 - Dangerous entity scams targeting traders, part 3: Education expenses are a problem in dual-entity schemes
Feb 27 10 - Dangerous entity scams targeting traders, part 2: Are trading education, seminars and travel expenses tax deductible?
Feb 15 10 - Dangerous entity scams targeting traders, part 1: Dual-entity schemes don’t deliver business treatment without qualification for trader tax status

What’s next?

We recommend a 30-minute phone consultation with Robert A. Green, CPA on all these matters and more. Watch our Webinars, organized by these Quick Link categories too. Read Green’s 2011 Trader Tax Guide, either by itself or in a value package with companion examples guides and Green’s book The Tax Guide for Traders (McGraw-Hill 2004).

If an entity is a good idea for you — and it’s best to find out first from Robert Green in a consultation — you can upgrade to our low-cost entity formation service. Robert Green chooses the right entity for your family and he sets it up in a tax-efficient and low-cost manner. Our outside attorneys do all the legal documents and review the entire work.

It’s important to start your accounting correctly from the start of your trading activity.

For securities traders, we highly recommend TradeLog for GreenTraderTax. We’ve added the tax knowledge to this industry-leading program since 2000. It’s simple to download your transactions and the program does the work you need, including wash sales and much more. Our accountants can do this TradeLog work for you as well.

Futures and forex traders don’t have to use a program like TradeLog; they can rely on accounting and tax information provided by their brokers. Futures traders receive a Form 1099 at year-end showing their net taxable gain or loss. Summary reporting is used for forex traders too and most brokers offer good online reports. Securities traders are the ones who need line-by-line or trade-by-trade reporting; with lots of transactions, TradeLog is the answer.

Entity accounting: Our accountants can set up and handle your entity accounting on an ongoing basis.

Retirement plans and health insurance deductions: As part of our consulting and entity formation services, Robert Green will consult with you on your retirement plans. We show you how to rollover and use your current retirement plans and set up the best type of plan for your new trading activity.