taxes/retirement

Hello,

Can someone tell me if I am eligible for an SEP-IRA if all my income comes from trading stocks? Does that classify me as self-employed? If not, how can I set up an IRA if I have no other job?

Thank you

 

I think if you declare trader status you should be able to do that. Otherwise I am not sure. I plan on setting that up next year also.

 

DG. If you are making money, why not set up another entity such as a Limited Liability Company, trade within it and have that company form a pension plan (for your benefit) and salt away much more than an IRA allows?

See TAXTRADER.COM since they are the pros. I have received some very good information from there and as well as a book.

Happy Hunting.

 

BigEd,

Have you set up a Limited Liability Company? If so was it difficult, timely, expensive?

 

I have a more complicated situation in that I had an existing C corp that I wanted to use to manage the LLC trading. Last year I filed trader status and I will no longer use that enitity for my trading.

Since the LLC is a LEGAL entity as well as a tax strategy, I will refrain from giving you specific advice about forming one, other than to say, it is more diffucult to set up and maintain than a sole proprietership, but it is well worth the time investment.

After all, TRADING is far more difficult than setting up an entity to operate it as a business. You've already done the hard part. The REAL money to be made is KEEPING it, not just MAKING it.

Go to taxtrader.com. Read the stuff. Send them an email. They will answer with very useful information. They did for me.

 

BigEd,

When you set up a LLC are the tax brackets the same as for individuals? Eg. If I pay x% this year under trader status, would I still pay the same x% as an LLC? Are the only benefits the write-offs/deductions?

Thanks for your help.
Dustin

 

When trading under an LLC or C Corp (don't elect that S status). The big idea is to pay yourself a low salary and expense out from the company all of your expenses. All your expenses are spent before tax dollars while your income is spent after tax dollars. The goverment is set up to benefit corporations, not individuals. Take advantage of it.

An S corp you can't do it. A lot of accontants say take the elective due to double taxation. That only falls under dividends. If you know you are going to have to pay taxes twice with dividends why would you ever take them? I don't.

Rtharp