shmoyer
18 posts
msg #39494
- Ignore shmoyer |
12/13/2005 8:48:00 PM
I had previously researched "trader status" and determined it was probably not worth the risk since it is often an open invitation to an IRS audit...been there twice many years ago and don't wish an encore. Being a 'hobby' is just fine with me. Thanks again, Steve
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limestar
79 posts
msg #39495
- Ignore limestar |
12/13/2005 10:23:41 PM
My accountant has advised me not to "Deal" with trader status. The savings won't be worth the headache when you get audited.
I hate dealing with taxes and an audit would just be an absolute hassle. I guess it depends on the person. If you don't mind potentially being audited, then go for it.
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shmoyer
18 posts
msg #39606
- Ignore shmoyer |
12/16/2005 1:50:22 PM
Way2Late...are there any restrictions I should be aware of when day trading within an IRA, other than margins aren't available?
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p0op0op
15 posts
msg #39635
- Ignore p0op0op |
12/18/2005 9:24:38 AM
Limestar,
Why would "trader status" target a person for an audit any more than a non-trader status label? I've never heard of this, just decided to trade daily and dumped the required amount in a "day trader" account to allow me to trade without restrictions. I've never been audited and have no desire to antagonize the IRS in any way - the horror stories are as close as I want to come to that scenario. If there is a hightened alert being labelled a day trader, than I would probably close that new account and trade less frequently.
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shmoyer
18 posts
msg #39644
- Ignore shmoyer |
12/18/2005 3:25:15 PM
This would only become a potential problem, i.e. audit, if you filed with the IRS as a "trader" as opposed to being an "investor". Obtaining trader status allows one to maximize deductions just like any other business but your trading must be 'substantial'. My research indicates that, for me anyway, it is to risky to obtain the trader status. Remember, day trading in itself should not trigger any flags for an audit just as long has you file 'normally' as an investor (hobby) and don't try to deduct expenses that would be available only to trader status. You might check out this web address for a more concise explanation: http://www.fool.com/taxes/2000/taxes000609.htm Hope this helps.
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Way2Late
37 posts
msg #39665
- Ignore Way2Late |
12/18/2005 11:07:12 PM
Shmoyer,
I'm not sure about the IRA accounts, I'm pretty sure they are cash only accounts, no shorting, and you have to use the 3 day settling period. I don't know if you have over 25K if you're allowed to daytrade tho...
Your broker should be able to tell you, if there is nothing on their web site.
We've been filing trader status for 5 years, no audits yet, We pay for several services so it's good to be able to write that stuff off, but we don't have many other deductions so our taxes aren't complicated and the trading paperwork is pretty straightforward. It's worth it for us because it's our only income.
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shmoyer
18 posts
msg #39672
- Ignore shmoyer |
12/19/2005 1:06:53 PM
Way2Late,
My intent is to trade full time begining the first of the year and as such will put in a full year before deciding to identify myself as a trader with the IRS. I would have very few deductions so I'm not sure if it would prove to be that beneficial. If you don't mind me asking what services to you subscribe to?
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limestar
79 posts
msg #39679
- Ignore limestar |
12/20/2005 12:38:25 AM
Too be labeled a "pattern day trader" by your broker is not the same as filing on your tax return with "Trader Status."
Pattern day trader is a no big deal rule your broker will apply to you if make a number of trades.
Trader Status is a whole nother ball of wax. There are tax advantages to filing for trader status, but you could also trade under a corporate umbrella which is again, a whole nother ball of wax, but can be combined with filing for trader status---confused yet?
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Way2Late
37 posts
msg #39746
- Ignore Way2Late |
12/23/2005 9:14:43 AM
shmoyer, our big expense is IPOfinancial.com, but we have stockfetcher, redundant ISP's and when we're backtesting new strategies I subscribe to Charts.com to get 1 minute historical intraday info. We also usually ad one or two new pieces of hardware that we write off per year. We also take the office in home deduction. When we're traveling and trading we write off our internet cafe time and other trading related expenses, we spent 8 months in Europe 2 years ago, and traded most of the time we were there.
We document everything well, so an audit, while frustrating shouldn't be a disaster because we're careful to be accurate in our bookeeping.
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shmoyer
18 posts
msg #39749
- Ignore shmoyer |
12/23/2005 2:25:47 PM
Way2Late...thanks for the info.... your answers to my questions are appreciated.
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