Funded trader taxes & Your Tax Returns
Funded Traders: Trading large sums of other people's money
More & more traders are reaping the benefit of being able to trade with large accounts without ever touching their own money. Funded traders (a.k.a proprietary traders) must still report their trading activity. However, funded trader taxes are much different than taxes on your own personal trading accounts.
FUNDED TRADING TAXES: HOW FUNDED TRADING IS REPORTED ON YOUR TAX RETURN
When you become a funded trader and you start trading with somebody else’s money, you are considered an independent contractor. This means, you will be earning self-employed income. Technically, you are conducting business as a Sole Proprietor if you have not yet set up a business entity. I always recommend that funded traders form a business entity for their funded trading activity, even though it is not required. As an independent contractor and sole proprietor , you will:
- File a schedule C with your form 1040
- Be required to pay self-employment taxes
- NOT report your earnings from a funded account as trading gains or losses but rather, earned income
WHY YOU NEED A FUNDED TRADER TAX PRO
For many funded traders, they have never owned their own business before. A taxpayers tax return becomes a bit more complex once you are considered self-employed. Typically, funded traders also have personal accounts that they trade and invest with alongside their funded account. As a funded trader, adding personal market activity to the mix will naturally result in a more in-depth and complex tax return. This means you will have many different parts to your tax return.
- The trading gains and losses are not accounted for on your tax return. (this only pertains to your funded account activity)
- Only the amounts of money you are paid by the funding organization will reflect on your tax return (as well as amounts you chose to retain in your funded account). Furthermore, these amounts will be classified as earned income.
- The IRS does not care if honest mistakes are made. Lack of understanding is not considered an excuse!
Learn Everything About Funded Trading
Want to know what funded trading is, how it works, how it is taxed, & who I consider to be the best funding prop firm out there? (There may even be an exclusive discount code to use with them 
)
TRADERS TAX PRO
We make it easy to prepare & File Your Tax Returns
At Traders Tax Pro, we make it simple for funded prop traders to file their returns. Be sure to have your invoices & payments receipts in order.
If you are a sole proprietor or, you’ve created a single member LLC, we will be filing a Schedule C with your tax return. If you’ve created any other business entity, we will have different procedures to follow.
Please also have your well-documented expenses in order as you will be able to deduct any ordinary & necessary expenses incurred as a funded trader.
On our introductory call, we will go over whether or no you have properly made your estimated tax payments throughout the year. If you haven’t, I will teach you what needs to be done for future reference.
Questions? Contact us