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Dave,
I am definitely not a tax professional and I have my taxes done by a CPA I have known for many years. It is way too complex and boring, imho.
I do not know the answer to your question, but it is a good question which, hopefully, someone here may have more helpful thoughts on.
Looking at my 1997 tax return form, I notice that my long term trading seems to have been reported on Schedule B and Schedule D. My daytrading and other short term trading appears to have been accounted for on Schedule C "Profit or Loss From Business (Sole Proprietorship).
The gross receipts (stock sales proceeds, less commissions & brokerage fees) was reported in Part 1 (Income), Line 1 - Gross Receipts or Sales. The stock purchases (plus commissions & brokerage fees) was recorded Part 1, Line 4 (Cost of Goods Sold). Line 5 shows net profit or loss from all the trading.
Part 2 (Expenses) lists all the expenses associate with my short term trading that would be deductible, including travel, training, depreciation for computers, etc. This part saved me quite a bit on taxes.
I see nothing anywhere about self-employment taxes, so I really cannot comment on that except to say that it appears I did not pay any. My guess would, therefore, be that for some reason it was not applicable in my situation. Line 23 of Part 2 mentions "taxes and licenses," which shows no amount on my return. I don't know what type tax belongs on that line.
Now, looking at your question, I would imagine you would NOT be required to file as a trader, but doing so would seem to prevent you from taking a lot of expense deductions and would also seem to require you to list all of your many trades during the year, quite a lot of work. From looking at my return, though, I feel that self-employment tax does not apply. Or maybe it didn't apply to me for some other reason incorporated elsewhere in my return.
Any CPA's around today who can comment on this subject?
Thanks in advance.
Bill
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