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Should Traders Take the QBI Deduction?

If you’re a full-time trader working in the United States, you might have heard of the Qualified Business Income Deduction. This relatively new deduction has allowed certain business owners to save money on their taxes. You may be wondering if you qualify for the deduction. Here’s what you need to know:

What is the QBI?

The Qualified Business Income Deduction – also referred to as Section 199A – allows eligible taxpayers to deduct up to 20% of their qualified business income, 20% of their qualified real estate investment trust dividends and qualified publicly traded partnership income. This deduction was created by the 2017 Tax Cuts and Jobs Act.

According to the Internal Revenue Service, qualified business income is the “net amount of qualified items of income, gain deduction and loss from any qualified trade or business.” This can include partnerships, S corporations, sole proprietorships, and certain trusts.

Essentially, you are eligible for this deduction if you own what is known as a pass-through business, meaning your business is not on the hook for corporate income tax. Instead, your business reports its income on the individual tax returns of the owners and is taxed at an individual rate.

Who Doesn’t Qualify?

The list of who doesn’t qualify for this deduction is fairly extensive. Qualified business income does not include investment income, capital gains or losses, dividends, income earned from businesses outside the United States or interest income.

If your taxable income is higher than $429,800 while filing jointly or $214,900 while filing solo, you do not qualify. Additionally, any owner of a business that is a specified service trade or business can’t claim the deduction, no matter how much or little they earned in a given year. This includes, but is not limited to, the field of health, accounting, law, athletics, consulting, investment management and, yes, trading.

So, if you’re a full-time trader, don’t bother worrying about the QBI next time you file your taxes as you will not be granted the deduction. And if you need any assistance with your taxes, bookkeeping or any other accounting services in the future, Traders Accounting is here for you. Our tax professionals can help make a complicated process simple for you. Call 800-938-9513 to learn more today.

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Do You Have to Pay Taxes on Bitcoin and Crypto?

Bitcoin and cryptocurrency in general have exploded in popularity over the past few years. Millions of Americans have bought, sold and used cryptocurrency for a variety of purposes.

Those who are new to the crypto world might wonder whether there are any tax implications to buying, selling and using Bitcoin and other cryptocurrencies. The answer to that question is yes. Here are some examples of when you may have to pay taxes related to your cryptocurrency activity:

Using Bitcoin as Compensation

Do you own a business that accepts Bitcoin as a method of payment? Are you an independent contractor who has received Bitcoin as payment? Are you an employee of a business that pays at least partially in Bitcoin? If you said yes to any of these, that Bitcoin you received is considered taxable income by the IRS.

Cryptocurrency Transactions

The IRS considers cryptocurrency property. You don’t have to pay a tax when you buy crypto, but you may have to when you sell. If you sell or trade your crypto for a gain, you will have to pay a tax. Let’s say you bought $2,000 worth of crypto and later sold it for $2,200. You’d have to pay taxes on the $200 you made. Conversely, if you lose money on a transaction, you can deduct that from your taxes.

Selling/Spending/Trading

As we covered above, if you buy a certain amount of crypto at a certain price and then sell it for a gain, that is taxable income. Now let’s say you bought $10,000 worth of Bitcoin and you trade it for a boat that would normally cost $20,000. You would now have to pay taxes on that extra $10,000. But if you used that same $10,000 Bitcoin to buy $17,000 worth of another cryptocurrency, you’d have to report $7,000 in gains.

If you’re a crypto enthusiast but need assistance filing your crypto-related taxes, Traders Accounting can help. Our tax professionals can assist you in filing all Bitcoin and cryptocurrency-related taxes. Call 800-938-9513 today for a free consultation.

Day Trader Tax Services

A Tax Guide for Sole Proprietorship Traders

When you make part or all of your income from day trading, you have several different options for categorizing and conducting your enterprise. While business entities such as LLCs and C-Corporations are often the smartest choices as far as tax benefits go, many traders prefer to trade as a sole proprietorship.

Sole traders or proprietorships are popular because they are an easier type of business to establish, you retain full control, and tax preparation is less complicated. If you’re keeping your trading enterprise small and decide not to incorporate, there are a few things you’ll need to know about filing taxes as a sole trader.

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Tax Planning and Preparation Services for Day Traders

How To Qualify for Active Trader Tax Status

One of the great things about trading is that all you have to do to become a trader is get started. Many people trade as a hobby, while others trade full-time to make a living, and then there are some traders who fall somewhere along that spectrum with their activities.

Depending on how much and how often you are trading, you may be able to reap certain benefits when tax time comes around. If you’re a serious, dedicated day trader, then claiming active trader tax status is your best option for maximizing your deductions and minimizing your losses. But how do you qualify for this elite tax category? Let’s take a look.

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Tax Services for Day Traders in Surprise, AZ

Why Have a Professional Prepare Your Taxes?

In the age of DIY and free tax software, it can be difficult to see the value in hiring a tax service to help you when it comes time to file. Many of us are of the mindset that there’s no good reason to pay someone else for something we can do ourselves.

While this philosophy makes sense for something simple, like washing your car or mowing your lawn, tax preparation is an entirely different beast. There are a lot of inconveniences and unexpected issues you may come across filing on your own, especially if you’re a self-employed or even an incorporated day trader. Read more

Tax Preparation Service for Traders

Four Tax Deductions for Traders

Working as a day trader can be a challenge. Making quick moves in a constantly fluctuating stock market that result in consistent profit is a job that takes time, skill, and resources to master.

Fortunately, when tax season rolls around, many of the expenses required to keep up with the industry translate into write-offs. In fact, any costs defined as ordinary and necessary to collecting and managing your income can be deducted. If you keep a detailed list of your business expenditures throughout the year, your tax preparation expert will be able to help you determine what qualifies as a deduction. Read more

New Tax Changes

2018 Tax Changes

When you file your 2018 taxes at the top of next year, you’re sure to notice some new elements as a result of the changes made to the tax laws in 2017. There were major tax reforms that were passed by Congress, and they could impact the taxes you owe or the refund you get back when tax time rolls around again.

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What to Do if You Haven’t Filed a Tax Return

Filing a past due return may not be as difficult as you think.

Taxpayers should file all tax returns that are due, regardless of whether full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan. It is important, however, to know that full payment of taxes upfront saves you money.

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