 Let me just get a couple of things out. There we go. Good. Good. Good. All right on. Welcome everyone. I'm really excited about today's event. I know we have a bunch of people here logged in from the cyber group room, the training room. We're broadcasting broadcasting live and all our social networks. I am very excited about this actual event that we're doing because we actually have somebody I think is probably one of the most important speakers and educators that you need to understand what it comes to taxes. Now, let me, I'll just give you, I'm just going to put my two cents. I'm going to pass it over to Jerry and Jerry will tell everyone about it. But on, you know, everyone always comes up to me. I've been, I've been doing this for 30 years and I pay a lot of money for an account. Okay. And everybody's like, you think like, wow, you know, he sounds like he's expensive this and that. I'm like, let me tell you the amount of money that he saved me doesn't even compare the amount of money I pay out of pocket. And, but you know, obviously everyone, like I had people ask me, well, you know, you do so well in trading, how are you going to pay all those taxes? Well, I'm not an accountant. All right. But we got the right person. He had explained those questions and you got this chat there. And he's going to, he's going to talk a little bit about that stuff because you can't go to an H&R block person and think he's going to know how to deal with your account. He's going to say, yeah, give me all your forms, all you're ready. And they look at the bottom line. They have absolutely zero clue. And I can't even explain how it works. I know we have people from overseas, from Canada. Some people ask, like, shall I open up an LSE? Can I write off my education? You know, listen, there's things you could do. So you just got to go to the right person. Now, your accountant is probably a really nice person. He's a good family member, but you have to understand there's nothing to do about your relations with him. There's a different type of accounting. They don't know too much about it. My accountant, when he got started, I mean, like, he had to learn it all on his own. But for some of you here, I mean, you're not going to come to New York and come to, you know, and do it. So, you know, Traders Accounting has been around for a long, long time. I mean, they've been around since as long as I've been doing it. So he must be doing something right, you know? So without taking too much time, Jerry, why don't you take over, tell people a little bit about you, show them what you have to do. And, you know, and if they have any questions, we'll be happy to share it with you. And like I said, if I have to jump in here and there, talking about it. But tell me a little bit about you, Jerry, what exactly, you know, what is a Traders Accounting? Well, Traders Accounting is an accounting firm or a tax firm specially designed for people who invest and trade in the markets. We handle things like the mark to market and trader tax status and we know how to handle it on the tax returns, which as Fausto alluded to, most accountants don't. It's not just H&R block. A lot of CPAs out there don't understand trading accounting. So we specialize that there's a few other firms in the United States that do, but it is a specialized field. And so we definitely specialize that. I'm a CPA. I've been working with Traders Accounting for a while now, but I've been in the business for 30 years myself. And then I've got a doctorate in business administration. So we do have some experience behind us, not just myself, but we've been doing this for a long time. So let's go ahead and get into the presentation. I'm going to put a link into the chat and that private chat. Can everybody see that link Fausto? Yeah, we sure could. Okay, fantastic. I'm going to refer to that here in a little bit. And then I'm going to go ahead and share my screen and I'm going to cut off my video just to save on some bandwidth here. So there's the share. And then I'll get rid of this. Can everybody see me or see the screen? No, right next to your camera, you'll see like a share screen. You can click on that. Yeah. Okay, I'm having an unresponsive error right now. Yeah, thank you, Fros. There you go. Okay, we're back. Okay, I'm still not getting anything in. All right. Can you see the screen though? Can you see my? Yeah, we see your PowerPoint. Okay, let's go ahead and get going with that. If it stops or freezes, let me know. Keep on going. These in 2023 things change constantly and we are coming up with a lot of difference. Traders that basically you can save money on taxes and I've got some brand new ones in here as well. So before we get going to the best of our knowledge, the information given in this presentation is accurate as of the presentation date. So I've, matter of fact, I reviewed this today and made a couple of adjustments here and there. And but before you use any of this information, please make sure you contact a tax professional who knows what they're doing, not just anybody. If they understand mark to market or trader tax status and fine, but if they don't understand that stuff, then please, by all means, get find somebody that does. But make sure you find somebody that knows what they're doing before you actually start implementing this information. The presentation does not establish a professional or confidential relationship between you, me or traders accounting and traders accounting is not a law firm. So the information here should not be construed as legal advice. So now we've made the lawyers happy. So let's get going here. All right, some contact information about us and I'm going to come back to this towards the end. So don't feel like you have to write it down right now. But that website address that I put into the chat is a very special address. It links to an ebook that you can download it's free. You can do it while I'm talking here, but certainly you can download that it talks about a lot of the stuff that I'm going to be referring to today. And we're scratching the surface here, folks, we're not actually going to be deep diving into things and certainly we've got time to answer your questions. I'd be more than happy to do that. But this is a this is something that requires some in depth research and consultation. So there's our free ebook if you want to get to it, the phone 809389513. And you can email us at traders accounting learn at a traders accounting.com. All right, let's go ahead and get moving here. Let's talk about business 101 stuff. If you're serious about trading. And really this goes into the IRS regulations as well if you're serious about trading you need to treat it like a business. It's not just a matter of going out there and just investing a few dollars and hoping to make a little bit that's a hobby. And the IRS will look at that they'll certainly tax your gains on it and losses but if you want to if you really want to get into this and get deductions and things like that you have to treat it like a business. Well what does that mean. Well first of all, you have to be concerned about cash flow. A lot of you probably take classes or go to seminars or you do research, why to get money in so you can earn those gains from trading. And that's great. That's a concern being concerned about cash flow coming in. But have you thought about your cash flow going out. In fact, all of you have some type of expenses you pay expenses and commissions which are embedded in the trade, you pay for possibly for data feeds you pay for dues and subscriptions maybe subscriptions to things. You have software, you got your computer things like that. And really, you have to think about this from two different sides, you got to think about the money coming in but you also have to be think about the money going out. I know a guy in Iowa, I've known him for actually 30 years or so, and he's got a great business. He's got millions of dollars coming in. But he already shows a profit because he's not aware of what's going out. So cash flow going out can kill you just as much as it not coming in. So be concerned about cash flow coming in and going out. Secondly, make financial decisions based on business needs, not the tax code. This is a bad time of year, December through really February somewhere in that vicinity people want to say, What can I do to reduce my taxes. I'll go out and buy some piece of equipment. And you don't do that you're making decisions based on the tax code rather than on what your business needs are. Never get into that trap because if you make decisions based on the tax code as to what you're going to buy and the expenses you're going to have, you're always going to mess yourself over. So if you're going to buy an asset, don't just do it because you want a deduction that's going to that's going to mess things up. Just an example I had a guy did some accounting for many years ago. He was in the automotive repair business, and he came to me in December said, Well, I need a real big tax deduction. I'm having a good year. I want to buy this tire machine. I said, Okay, how much it costs was going to be about $20,000. I said, How often are you going to use it? And he said once or twice a year, but I need it for the tax deduction. And I explained to him that that's just going to mess him over and he's going to end up paying more. He's going to have this big old tire machine sitting around in the shop and it's not paying for itself. When you make business decisions, even in trading, when you make expenses, those expenses need to pay for themselves either directly or indirectly. Now, one of the purposes of this presentation is to be aware of all your tax and protection options. They go, as I mentioned, they go beyond all of this, this presentation, even the ebook, which is why you need advice from somebody. It's very important to get the advice to make sure not only it's up to date, but also that everything is taken care of properly. So what we're going to cover in this presentation, we're first going to talk about trader tax status. And this is good for all traders. No matter who you are, if you trade stocks and options, if you trade cryptocurrency, if you trade 4x or futures, whatever it is, I mean, anything, that's good. If you meet the qualifications and we'll talk about that. Entities, we will talk about entities. Should you form an entity, should you form an LLC or a corporation, S corporation or C corporation, we will get into that as well. And then mark to market. That is an election that stock and options traders can make. That is only for them and that helps them save some money as well, but we will get to that in the long run. Let's talk about trader tax status. Again, this is for anybody. Any entity is for individuals. It's for LLCs, partnerships, S corp's, any entity can do this. But it's a tax choice. It's not something that you have to elect with the IRS, but it's a choice that you get to do if you meet the criteria. And this is the catch right here. You have to meet the criteria. Now, what does it allow you to do? It allows you to deduct trading expenses. Now, as a simple investor, you cannot just deduct trading expenses on your tax return. Now, you might get away with margin interest, and there's a special form for that. But any other expenses like subscriptions or your computer, things like that, you cannot deduct those unless you meet these criteria. Now, if you go back to publication 550, now publication 550 is the seminal document with the IRS. You can go to the IRS website, irs.gov, and in their search bar, you can type in publication 550. And it will bring that up and you can download to your computer if you want, or you can read it online. It's up to you. It is a large publication. It deals with all types of trading, everything from bonds to interest to dividends, original issue discounts, futures, stocks, options, things like that. I mean, it's 70-something pages, 80-something pages, I don't forget, but it's big. I would recommend getting that and downloading it to your computer so you have it as a reference. It's free. Now, one thing about publication 550 and IRS regulations is they are written very vaguely. IRS, and I think that's by intention so that the auditors can actually nail taxpayers to the wall and make them go to court to actually prove things. So we have court cases that show some criteria for trader tax status because in the publication 550, basically, there's three criteria. You just have to be regularly inactive trading. You have to be doing it. And the concept is that you have to treat it like a business, not going back to that first slide. You have to treat it like a business or else the IRS is not going to let you do it. Well, people have taken it to court. And what's come out of the court cases are these things. First of all, you need to be making at least 700 trades per year. So 700 is kind of the minimum that we see. We know there's a court case that permitted the taxpayer. It made more than 700. It was 720 trades in a year. So that qualified them for trader tax status and allowed them to deduct expenses on their tax return. Second criteria, there is trading in over 75% of the trading days per year. So you figure there's like 200 something trading days in the year, 75% of those you need to be making some type of trade. And this is really where it gets to treating this like a business. Because if you have a regular business, let's say a restaurant or you're a mechanic or something like that, you're not going to take half the year off. If you're the only one doing the work, you're going to invest yourself in the business. And so this is a criteria here that needs to be met so that you can look like you're treating it like a business. And there has to be over 500 hours in trading research and education. Now, when you're doing stuff like watching this video or you're doing other seminars or whatever, that qualifies as education. So that's part of doing this research, obviously researching what to buy and of course trading itself. 500 hours in a year, that amounts to about four to six hours a day trading day out of each day. Now, maybe wondering, okay, well, what in the world, how do in the world would prove this stuff? Well, the first two 700 trades in a year and you're trading in over 75% of the trading days, that you can prove with your statements, monthly statements you get from your broker and your 1099B that you get at the end of the year. Just somebody questions at the IRS questions that you hand them and say, okay, I did you figure it out. Here it is. The 500 hours of trading and research and education, we recommend that you keep a log of what you're doing and when you're doing it. So that if the IRS ever comes in and questions this, you've got that logbook there. It doesn't have to be manual. You don't have to do handwriting. You can do it on your computer. But there needs to be something there to show the IRS that you actually have spent that time. Now, the tax savings here depend upon your current tax brackets. So if you're in the lower tax brackets, you will not get as much as far as a reduction in your taxes as you would if you were in the higher tax brackets. So this also makes a difference as to whether you want to deduct expenses because if you're in the lower tax bracket, it may not be worth subjecting yourself to certain things. And we're going to get to the problems here actually in the next slide. So let's go ahead and get there. There's a warning. Because while it seems nice to be able to deduct your expenses from trading and a lot of people have a lot of them. You know, your subscriptions or your computer, your data feeds, whatever it is, there is an issue. A person, I'm talking about an individual. I'm not talking about an LLC or an entity or anything like that. But a person deducting trading expenses on their personal tax return must use a Schedule C. Now, Schedule C is a small business tax return. And now if it's a normal business, not a trading business, you would put your income at the top and then you list all your expenses at the bottom. And then you figure out what your profit is and that's what would get taxed. Traders are a little bit different. On a Schedule C, there is no income. That goes on the Schedule D. And actually I talked to a client about this earlier today. Is that when you have gains and losses and interest and dividends and things like that, they don't they go on Schedule D or Schedule B. They don't go on the Schedule C. So there is no income on Schedule C. Only expenses, which is fine. But there's some problems that occur. Your audit risk has increased. The very fact that you put a Schedule C onto your personal return increases your audit risk. It doesn't matter what the business is for. It doesn't matter if it's for a restaurant or your mechanic or whatever it is trading. Your audit risk has automatically increased because a Schedule C is a target of the IRS. It's been abused for decades. So just knock it up. You have a higher chance of audit risk resulting from that. Number two, there is no home office deduction. Now, this is an important one because people think when they read and say, oh, I can use a home office deduction to actually write off some stuff. Well, not if you're a trader. Remember, I said that traders do not have any income on the Schedule C. They've only got expenses. And so as a result, you've got zero income minus all these expenses. You always have a net loss showing on the Schedule C. If you try to take the home office deduction, it will not take that because you can't take the home office deduction when you have a net loss. So it carries forward to next year. Well, if you keep trading, it just carries forward and definitely never get to use it. So there's really no point to it. Now, we'll come back to that here in a little bit. Number three, if you trade as an individual, there is no asset protection unless you have like a living trust or a revocable trust, something like that, where you can put this stuff into the trust and then you've got some asset protection. But otherwise, if you're just a person without any type of trust, then there is no asset protection. So if you were to get sued, let's say your car accident or something else you get sued, then all your assets, including your trading assets are exposed. Number four, this is actually kind of a difficult one with the IRS. The IRS does not like when people have a W-2 job or another Schedule C. Let me put it that way. Full-time job and being an active or a full-time trader for whatever reason they have issues with that. And so this becomes more of an issue. You have to justify that with the IRS and show, well, I was doing this full-time trading position while I was also doing this full-time job. And then you really have to dig into that and show hours and stuff like that, and it becomes more complicated. So those are the warnings here. Hey, Jerry, I have a question for you. You hear me, Jerry? Yes, can you hear me? Okay, I had a couple of questions for you because, I mean, this is fabulous and I get this question all the time. So getting back to the slide before that you had, I hope you could just go back one slide. Yeah, give me a second here. Back it up one thing at a time here. Okay, there we go. There you go. Okay, so the 700 plus trades a year, okay? And now basically just repeat that again because some people always ask me, because we're talking about deductions, and then my next question is what you go into the next slide. People ask, okay, well, how do you go from a Schedule C versus, you know, do I open up a corporation and do all those deductions and stuff like that? So getting back to the 500 hours, just let everybody know that if you're in our trading room, it's a cyber group room, that's basically education. Yep. So I mean, like, you could do that in a week, you know, like, or less than a month. I mean, you're there, you're logged in, you know, we track everyone's logs. So, you know, the logs are there, you know. Yes. Yeah, so that's taken care of. So if everybody understands that, that's one part of education. Now the trades, how does that work again? Well, the trade, if you, well, first of all, a lot of questions that I get is, is our buying a cell, different trades or they counted as one. And a buy is one trade, a sell is a different trade. So those are two trades, basically. So you need to have 700 of those in a year over the course of a year. Now, if the trade gets broken up in lots, that's also different trades. For example, if I want to buy, I don't know, 5,000 shares or something, and it gets broken up into three different lots, that's three different trades right there. So it's not that difficult to make those trades in a year. Does that answer your question? Well, because then you could just go out there and buy 10 shares. Let's say I want to buy 1,000, I'm going to buy 10, 10, 10, 10. Yeah, that's kind of the loophole here. That is a little bit of loophole. Now, can you deduct your education? Yes, if as long as it pertains to trading. So yeah, any training classes certainly are deductible. We can get those on schedule C or if it's in LLC, there's a way to get them into the LLC. Even if you start the LLC now, and we can go back 12 to 18 months to capture some of those expenses. Okay, good. So that's another good question to ask you. If you're basically, you're starting out and somebody like, because we have people all the time, they always want to like, do I start now? Do I like to open the LLC? I want to get to the education. So you could do your education now what you're saying, and you could still deduct that. Let's see, if things work out, you could do your LLC, you know, 12 months, 18 months from now. Absolutely, yep. Okay, all right. And we can help people get those expenses together and make sure that they all get deducted. Now, when does it come to a time, and that's going forward. Let's go back to the one that you were on. When does it come to the point of, these are the warnings like, you know, we're talking about schedule C and everything else, because we have accountants that are also students too here that are listening. I know people also online are hearing that. But the other question is like, when you start getting away from like, when do you promote yourself from a schedule C from a personal deduction to go to an LLC? When does that come into effect? Because people realize it, like, they get nervous opening up a corporation, you know, first of all, it's expensive. You know, I mean, if you have to do it regardless, you need to do it. But like, you know, you got to make X amount of money, whatever it is, because you got to make it worth it. So when you get to that point versus dealing with a schedule C and like, you know, when you need to upgrade. Actually, it's a topic I'm going to address later. But if you're from my opinion right now is as soon as possible. If you've got any amount of expenses that you want to deduct, it's better just to go ahead and get the LLC. And it's not as expensive as you might think. Most states are between $100 and $200 a year, which quite frankly is peanuts. Well, that's not really what I'm worried about. It's more or less like, you know, getting the, you know, paying the fees on top of that, like the county fees registering. Like people think it's easy. I think it's just once a month. An LLC you have to do, you know, just have to report quarterly. No, not unless you're making a significant amount of money. Now, the LLC, depending upon which one it is, is usually a pass through entity. And so it passes through to your personal tax return. So the most LLCs don't pay taxes themselves. It passes through to the personal return where the taxes are paid. So if you've got enough from the LLC that's adding to your personal tax return, then you'll want to make personal estimated tax payments. But as far as the LLC goes, you don't have to do anything quarterly at all. And the other question I have, why would someone open up an LLC versus an S court or C court? Well, S corps and C corps have a salary requirement. And so you're going to need some type of a payroll to go in there, particularly with an S corp. Because what they don't want, the IRS doesn't want is people just drawing money out of an S corp without a salary because then they lose the social security tax on that or self employment tax, whatever it's same thing. Okay. So they require some type of salary coming out of there. So it gets a little bit more complex. Generally speaking, a multi member LLC is the simplest form and then we build on that once the trading is actually secure. And we've got a good foundation. So and getting back to you with number four, what you have right there is the W two job. They don't like you having a W two job and then also a trading deduction. Correct. Yeah. So but if you, but if you had a W two and an LLC, it's okay. Yes. As a matter of fact, they look at the LLC as long as it's a an LLC that's off your personal tax return, like a partnership or an S corp. As long as it's off your personal tax return, they, the IRS looks at it like you're investing in a business. And it's something totally separate. So you have just W two job. And then you've got this other business that you're investing in, even though you're putting tons of time into that business, but they don't have a problem with it. Okay. Now, do you have to open up? Cause this is another problem people are having. There's two other questions I have for you. First of all, I guess we could talk about this a little bit later because we got people from overseas like Canada and stuff. And they want to trade the U S market and want to know how they can do that. I don't think if you, if you know a little bit about that, I know they have different tax purposes, but I know you probably do that in the side. But the other part, do you think people have to worry about is that if you do go on as an LLC, are you going to be tagged with the brokerage firm to open up that account as an LLC? And then be tagged as a professional because what happens is that when you do that, then fees become a lot more expensive too. Well, you are correct about that. They do become more expensive. That is one of the drawbacks. Now we have worked with people that they have like a personal account and they've got their LLC account. And they do all their research and data feeds to the personal account to avoid the expenses while trading through the LLC account. But say you have to have the account underneath the LLC's employer identification number in order for it to be properly recorded with the IRS and to go on the tax return. You can't use a personal account and then have it go on to an LLC that won't work. But would I have a personal account going into like an S corp if you do draw a salary? Well, you still have to change the personal account into a business account because that S corp's EIN has to be on that account. Okay. All right. These are all like little questions like I know a lot of people always ask because they get a little nervous when it comes like how do I do that and this and that but like getting back to I'm sorry to cut you off but like the things that if I see some because these are questions that I like I'm on account. I don't talk about it but you know, I leave that's what we have you here. But these are things that people always come up like what about this and like is it really necessary? Should I have it done or whatever? Like you know, like you just said earlier when you first started, you got to treat this like a business. I mean, and you know, and it really is and I don't get nervous that you're opening up a business. You know, there's there's all these benefits from but you know, you can go ahead then. And just to close that out, you're right it is it's nerve wracking when you first go into it. But quite frankly, once you get the entity set up, it just you do what you normally do during the year except, you know, tax time you just got one extra tax return you got to do generally. And you save all that money. I mean, like you get those deductions and that's the big difference why we had you here and everyone has to understand that. You can't go to a regular account and do this. They don't get it. They don't understand. And they don't want to sound stupid. Like, oh yeah, we'll think we could do it. And then like, let me tell you the stories I hear some of these people asking like, what are your accounts asking for? What do you need? And this side of like, like, listen, it's okay. He doesn't know what he's doing. It's, you know, let him do you personal. Let someone else do that. But yeah, exactly. And then we have a lot of clients where we do the business return and then the another accountant does the personal return. But that's not a problem. So anyway, let's go ahead and get going again. The trader tax status then is for deducting expenses has nothing to do with the gain or loss side. It's just getting expenses on the tax return. You can do that through any entity. So let's talk about entities though. There's a lot of different types of entities sole proprietorship single member LLC general partnership limited partnership multi member LLC S corporation limit LLC S corporation C corporation LLC C corporation. That's a lot of them. Let's just cut through a lot of the crap here. First of all, sole proprietorship is what you generally do if you're just a personal investor. Remember I talked about deducting expenses on your schedule C. That's a sole proprietorship right there. And a single member LLC, all that does a single member LLC gives you some asset protection, but it puts it right back on that schedule C right where you don't want it quite frankly and increases your audit risk. So those two really don't do anything for a trader. Do we have clients that do it? Yep, absolutely. We do, but their audit risk is increased and there's some deductions they can't take as a result of it. So that leaves the other entities and the type of entity that's right for you depends upon your situation. We have to understand where you are where you're going because we've already brought up multi member LLC partnerships. We've brought up S corporations and in the background they're C corporations. Which one's right for you? Well it depends on what you want to do and kind of a future plan there. So we have to have this kind of structured out a little bit. So we'll talk about it. Well let's talk about first of all a multi member LLC. Now why am I starting here? Now you can think of this as a partnership, but it's got to be an LLC partnership. If you just form a regular partnership then you do not get the asset protections. Now granted you don't have the LLC fee each year, but you don't have asset protection and other things can go wrong. But there's another benefit to LLCs, I'll tell you here in a little bit. Before we get into the pros the cons are the yearly LLC fee. You do have a fee every year for your state. With a couple of exceptions, Arizona's one of them that once you set it up you never have a yearly fee again, at least not right now. Some fees are as little as $25 a year. Most are around $100 to $200 a year unless you live in California, which is $800 a year. That's the worst in the country, quite frankly. You also have a tax prep fee. Now again you need somebody who can prepare the taxes to save you some money. That can run, I don't know, $500 to $1,000 somewhere in that ballpark. But it can save you some headaches plus because if you've got a CPA preparing that return, quite frankly you're less likely to get audited because the IRS knows that somebody with some licensing has looked at it and they are not going to jeopardize their license. And of course I should put it on here and probably will. But some point is that you do have the extra fees in a business account that you do have to set up. But believe that as it is right now. But the pros and these are big one you get the asset protection in the LLC if you don't have a trust for your personal assets and LLC will protect those assets to some limited extent that every state's different. So but you do get some asset protection out of it. To most people don't know this but you have a choice and taxation methods. What we recommend to our clients is they first set up a multi member LLC and that's why I've started here start here. But as an LLC. Every year you get to choose how you're going to be taxed. Now we generally start them off as a partnership. But next year, if things are going well and we've got a plan going here, we can file an election with the IRS to be treated as an S corporation. And so for 2024 operate as an S corporation. You get to 2025 say, hmm, I want to be a C corporation, then you file an election to be a C corporation. You don't want to do that anymore in 2026 you go back to a multi member LLC, you can change this every year and I don't recommend it. But we start off with a multi member LLC that's very it's the simplest of all of them. So that we can get see that our clients are getting their trading methods secure so that we know have we have a consistent income or that cash flow thing I was talking about. Now we've got consistent income, because if you go to an S corp or a C corp, you have to have consistent income to do some other things there. So you can change your taxation methods you go back and forth all you want. Three, a reduction in IRS scrutiny. This is a big one. The IRS seems to leave partnerships and S corporations and C corporations pretty much alone. Now, you say, well, I'm not too worried about it because the IRS is going to hire 87,000 new higher agents, and they're going to be at the IRS said that they're going to go after rich people. Wrong. And I've been telling my clients is now for a year ever since that came out. The IRS is not going to spend the majority of their time and the majority of their cost, trying to go to court with corporations or rich people that can battle them for years. They're going to go after the low hanging fruit, which is basically the lower to middle class. And I saw a study from Syracuse University here a few weeks ago, and they did a study on what who the IRS is auditing and that's exactly what's going on. The IRS is not auditing these rich people or the rich corporations. They're going after the low hanging fruit. The person they can go say hey you owe us $2,000 and that person says I can't fight this. Pay it to get rid of them. Easy fruit spends maybe an hour to the IRS auditor examiner's time. It's done. It's over with. I also saw a study yesterday that the IRS is going to beef up scrutiny on tips where waiters and waitresses are going to become under more scrutiny for declaring tips. And a lot of these are college students who are getting by just based on the tips that they make. They're always college students, but some of them and they're going to go after those people. So by getting this stuff off into what I call off personal tax return of partnership tax return as Corp or C Corp return, you reduce that IRS scrutiny considerably. You're basically paying for some insurance, if you will. Number four, the home office deduction comes into play now. I mentioned that if you do this as a personal investor, whether it's a sole proprietorship just by yourself or as a single member LLC, you have to file a schedule C and you can't take the home office deduction. And of course that goes back to the net profit. That home office deduction opens up if you have a multi member LLC or an escort or C Corp for that matter. So you get that deduction. Now I'm going to come back to this in a moment. A lot of times for people we can get between $1,200 and $2,000 in deductions just from home office because you can write off a percentage of your mortgage interest and real estate taxes or percentage of your rent. You got insurance. You've got utilities, repairs and maintenance, HOA dues, cleaning, whatever. Anything that goes into that house or apartment, we can take a percentage of it off. Number five, I mentioned this a little bit. It's getting it off, getting your trading off into an LLC solves the W2 trading issue because now you've got this business that's trading. You own that. You're investing in it, if you will. And you got your W2. There's no conflict there. The IRS doesn't care about that conflict anymore. They just don't want it on your personal tax return for whatever reason. Number six, now this one requires I'm jumping ahead a tad bit. It solves the mark to market long term, short term dilemma. And I've got some abbreviations there. Mark to market is an election. I'm going to talk about for stock and options traders. What you don't want undermarked to market is to put your long term holdings and your short term holdings close together because if you do mark to market and the long term holdings go undermarked to market, you lose the long term capital gains rate, which is now capped at 20%. Can't go over that. So what this does is we recommend to our clients you get all the short term stuff off into the LLC. You do mark to market there trade short term in the LLC. And then keep your long term stuff on your personal side. And that way you get the bus to both worlds there. Number seven is one that I have discovered recently is probably a very important one. The tax savings for an LLC can pay for the multi member LLC or S corporation or C corporation, but we'll stick with the multi member LLC. You say, wait a second, how is that? Just in the home office deduction alone that we pick up, you will be able to get a refund back that may pay for most if not all of your LLC fee and your tax prep fee. So let's give me an example of this. If you already have yearly trading expenses, margin interest subscriptions, things like that we went through that. The refund that you get can pay for the yearly LLC fee and tax prep fee and I'll give you an example here. Assume a person lives in Kansas. Now in Kansas, the yearly fee for an LLC and by the way, it's probably the same thing for an S corporation if you go that route or C corporation $165 a year. Now tax preparation fee, let's just assume 750. That's not what we charge necessarily. It's just I've just picked out of the air so that I can give an example here. So we have a total of $915 and extra expenses that you picked up the LLC fee and the tax prep fee. Now, we also have to know this also depends upon your tax bracket. The person is in the 24% federal tax bracket and the 5% 5.7% Kansas tax bracket, so a total of 29.7% in taxes. Now, remember, I said these pass through entities, everything goes back to your personal tax return. So it's all going to get packed tax on the personal side, but it goes through cleaner. It doesn't go through that schedule C and stuff. So just to clarify there. All right, so in this case, this person needs about $2,166 in trading expenses to get the government to pay for the LLC. In other words, the refund they get on the first $2,166 that they deduct is going to be enough to offset the LLC fee and the tax prep fee. Let me show you. Here's the proof. Our trader has $915 in the extra LLC fees. That's the licensing fee every year for the state and then that's the tax prep fee. By the way, this is different in every state, so don't necessarily go solely by these numbers. And the taxpayer has an effective rate of 29.7%. So we calculated there's $2,166 in extra trading expenses. Remember I said that we could get between $1,500 and $2,000 just for the home office deduction that just opened up? Okay. So the total deductible expenses are $915 and the $2,166 in trading expenses or a total of $3,081. The tax savings that you get or the deductions was going to save you at a rate of 29.7%. That's $915 that you get back as a refund, which is the LLC expenses. Those deductions right there, the tax prep fee, the licensing fee with the state and then your $2,166 in extra expenses pay for the LLC extra costs right there. In other words, you get your LLC pretty much for free. So the LLC, the government can actually pay for that for you. All right, let's move on. So we've talked about trader tax status, how you can deduct expenses on your tax return. We've talked about entities. Generally, a multi-member LLC is right for people, but there are exceptions and we have to know goals and stuff like that. The third thing we're going to talk about is the mark-to-market election. Now the mark-to-market election, this is an election with the IRS, so it does have to be made with them. This is not something you choose like trader tax status. You do have to file something with the IRS and it's for stock and options traders only. Now any business entity or individual can make the election provided the trader tax status qualifications are met. So personally, if you meet the trader tax status qualifications, then you can elect mark-to-market as well. Businesses, a lot of times people want to say that you need to keep those trader tax status qualifications up, but the IRS seems to be a little more flexible with businesses. We're still kind of feeling that one out a little bit. But anyway, this election eliminates wash sale losses. Now let me explain that for a second. If you're not familiar with what wash sales are, if you have a security stock option, it doesn't matter and you sell it at a loss and then you buy something back, anything with that ticker symbol within 30 days. So you could buy it, sell a stock for a loss and then you maybe buy an option back within two days or something like that. The loss on the first sale moves to the second one. Now you say that doesn't sound too bad. Well, one, if you're doing rapid trading, there can be massive amounts of losses moving, but particularly when you they cross over December 31st because now you've got losses that were may have been say in 2022 that are now in 2023. So you're going to pay tax on 2022 when you had losses because that loss moved to 2023. You'll get back in 2023, but now you have to pay the tax now. And that's a major problem. With mark to market, it does it by a valuation of your account. You look at what the account was worth at the beginning of the year, what the account was worth at the end of the year. If the account goes up, that's exactly what you pay tax on. There's none of this plan around with deferred losses. And if your account goes down, you get to write the whole loss off. There is no $3,000 limitation. Go ahead. Jerry, when you see me popping up, I just had a quick question. I just want to bring that up. So you hear people trading and like you're getting to the end of the year, right? And then people like, we always talk about people just trying to book their losses to carry it over so they can take it to this year or carry it to next year. So when you hear people like say, I'm closing my positions, like most trades are going off like before December 1st, so they can do within 30 days. They can't take a loss going into mid and December, if you know what I mean. They can, but they cannot go back into any of that ticker symbol's positions again for 30 days. Because it won't carry over. Then it won't carry over. That's one of the reasons brokers don't issue their statements until late January's because they've got to wait some of that time to see how the wash sales are clearing out. There's an actual strategy about that that you have to take. If you don't want any wash sales, take December off. Don't do any trading in December and that'll clear out all your wash sales. Clean all your wash sales. Okay. All right. So it gets a little bit tricky and they can really create all kinds of problems. That's one of the reasons I picked the picture up there because getting rid of those wash sales and that $3,000 limitation, that's almost like freedom for stock and options traders. Because you don't have to worry about that stuff anymore. And almost always, under rare conditions, this isn't true, but almost always you end up, your gain is always smaller than what it shows on the 1099B, or your loss is bigger, larger than what it was on 1099B. In other words, the 1099B traditional accounting inflates what you have to pay. So you end up saving taxes in the short run. And just to tell everybody that's listening and is watching live right now, we're going to do a quick recap at the end. So if you have any questions, I see a lot of people putting questions, we'll share them in there. And Jerry will try to answer as best they can, but we could be here for hours talking about it. But we only have so much time, but we'll let you know how you guys can register, talk a little bit about it and go from there. So I'll post those questions, but we'll do a quick recap when he's done with it, because I think everybody's like this. Some people are logging in late, some people are watching a little bit, logging in, and we'll cover that. Okay, absolutely. So the market to market election is actually a pure way of accounting. So you pay tax on what you really made or you write off. And I've seen people write off over $200,000 in a year. In fact, I've already written off for some people $150,000 for 2022 because they had the mark to market election. So that goes against their W2 income that goes against all their income and anything left over remaining loss gets carried forward to next year. So it's really a nice thing to have for stock and options traders. This is an election. It has to be done with the IRS. You have to make it at the beginning of a year for an individual or an existing entity. So for an individual, you have to make this between January 1st and April 15th. Publication 550 does tell how to make that election. It's a letter. It's not anything dramatic. There's no forms involved. You just fill out a letter. Same thing with like a S Corp or partnership or C Corp. Well, C Corp could be doing by April 15th, but that S Corp in a partnership would need to do it by March 15th. C Corp will be April 15th. Sorry, I'm getting all my dates mixed up. So those have to be done fairly soon because you make it in, for example, for 2023, now is the time to make it. If you meet the trader tax status qualifications and that will carry forward indefinitely until you decide to revoke it. And so you don't have to make it again. Now, with one exception, if you start a brand new entity, the entity can start with mark to market at the point it forms. So for example, let's suppose I wait till July and I form an entity on July 15th. That entity right then, as soon as I get the brokerage account set up for the entity, I can start with mark to market immediately. I cannot go backwards and you can't go backwards and try to say, oh, I want to take my personal stuff and put it into the LLC. It won't work. You can't do that. But the time when that entity starts, then you can start mark to market at that point. But in the existing entity, something that's already been in existence, you have to do it between January and either March 15th or April 15th, depending upon which type of entity it is. All right, let's summarize this. First of all, trader tax status allows you to deduct trading expenses if you qualify. We went through all those qualifications. Forming a multi-member LLC particularly provides asset protection, decreased audit scrutiny, and it could be free. And again, we recommend that most people go to a multi-member LLC first. And then if you want to go the S corp route, you can elect that or even the C corp route later on. And then mark to market allows stock and options traders to pay tax on what you really earned and write off entirely what was lost. So let me give you contact information again that web address is back up there. You can download our free ebook. If you want to do that, that would be great. There's no obligation there. Take advantage of that. If you want to set up a consultation with us, our phone number is right there. We do two tax consulting to find out what the best path for you is. We also do tax returns. In the heat of the battle right now, and I've done probably over 60 something returns already this year. So we are in the heat of that and all of us related to trading. We also have a bookkeeping service that if you want somebody to keep track of how your business is doing throughout the year, we do have that as well. And if you want the LLC set up for you, we can do that. We have an LLC setup service. Our owner Raven Johnson is doing that for 20 years. She knows what she's doing can get it done in any state and and can get that taken care of. And of course, our email is at learn at traders accounting.com. So what I'm going to do here is I'm going to start taking questions. I'm going to actually minimize this so I can get back into studio. And then we can actually get back. Yeah, there you go. You can actually leave that up and running. It looks like your webcam is. Yeah, I'm having problems with that. So let me get back. There you go. Okay. Yeah. So yeah, quick recap. So I think this is like the first people that was asked me because a lot of people are taking classes of the people. Some of you are, you know, are part of Cybertrain University and students. So, so regarding about this, does this apply for not, not just stocks, but like one question came across here in the training room. Does this also apply towards forex futures and options? The trader tax status does mark to market doesn't because they have their own special taxation methods. So you cannot make mark to market for futures or any of the others. It's only for stocks and options. Yeah, that was from Dan on, on YouTube was just asking that question. I just posted that up now regarding about, and by the way, if anyone has any questions, we got about just about a minute or two before we let Jerry off. So please post your questions in there. Getting back to getting tax status. You got to do at least 700 hours. Am I right? Okay. 500 hours per year, 700 trades. Okay. I got it backwards. That's right. Okay. So you got to do 500 hours, 700 trades and 500 hours. If you, like I said, if you're in a chat room, a training room, depending on who you're working with, they should have that data. If you're a student of ours, when you log into our portal page, we have all that data for you. So that's taken care of the trades. Like he just said, that's kind of very easy to figure out. You could do it's not just, you know, that sounds like a lot of trades. People like, wow, that sounds like a lot. You only do two trades. But like you said, you could do, you could do like 10 trades, you know, like let's say you're doing 1000, you could do 100, 100, 100, 100, you know, 100, 100, 100. So you could do that. And believe me, it goes pretty fast. So I, you could worry about that more towards the end. Listen, the whole idea is the benefit to do this all is a tree like a business. So the benefits again, Jerry, on the tax write offs that you can get being having tax status. Yeah. So having tax status, you can write off all your trading expenses. And then just there's a whole list of them. But basically anything related to trading that helps you trade or helps you trade better is going to be deductible. And it works a whole lot better in an LLC, not a single member LLC, but an entity that's off your personal tax return. We have a, we have a trader on YouTube says, so I'm running an escort out of my house and they also trade with CTU, which is us. Can I write off my monthly CTU trading fees? Absolutely. Yep. And that would be a great thing to do. I would recommend it. Okay. And Ben has a question here. If I trade with a prop firm, do I? Does the trades count? You get 1099 miscellaneous. Does the problem need to shield as will any, anyway? Yeah. Everything I've mentioned so far does not apply to prop firms. It does. It's when you do it with your own personal trading. Prop firms are different because now with the 1099 miscellaneous, you have to report that on a schedule C because you're not getting gains or losses anymore. And you are now subject to self-employment tax. Right. That's what I'm saying. You're basically an employee when you're a prop trader. Yeah. Exactly. So trades would not count in that case. You would have to actually do your own trades, not somebody else's. Yeah. Because Ben, you got to remember, those ain't not your trades. You're literally, you're trading someone else's account. And the main reason why, and there's benefits and there's not benefits from being prop firms. I mean, when I first started, I worked for a prop firm specifically to learn, you know what I mean? And trade someone else's money. So when I lose, they have money, not mine. So they, so when you think about that, they get all the deductions and everything else. So you're just a more of a W2 employee. Great for a beginner trader to learn, but long term, it's not really the way to go. Yeah. But that's a particular case where you have to pay attention to your tax structure. Because if you're not aware of what's going on, then you can get hit with a lot of self-employment tax. So that's something you need some consulting on. Yeah. So, yeah, so if anyone has any questions, by the way, if anybody would like to, you know, we'll post a link up if anybody wants to get into my trading room, you're more than happy to. Just make sure, you know, I have a lot of people asking in here, how can I get this recording and so on? Like I said, on the bottom, just subscribe to our channel and you'll be able to access this recording. Because let me tell you something, I mean, regarding Jerry, out of all the events that I do, I always look forward to having somebody like you, because listen, we all here to gurus, we'll talk about why my trade is better than this and how to protect. But you know what, this is a very unique situation. This question comes up a lot when it comes to accounting. And you know, you really, because people, they get nervous, like, what do I do and so on? And you'll realize the benefits that you can get from it also, just, you know, you don't have to be a crazy trader or whatever, but there, you know, you could deduct a lot. You know, why pay those people? Yeah, and now is really time to start thinking about 2023 and doing stuff, because also now is the time where I have to start listening to people say, oh, I had all these problems in 2022, what do I do? And I have to sit there and say, nothing. It's too late. So, but planning ahead is very important for tax and trading. Another question I had for you, too, before I let you go, regarding about Canadians, because we have a lot of Canadians that we train. How would that work for, you know, someone straight to US markets? Can they open up an LLC here? How could they, how could they get it? You know, like, because their taxes are like horrible. You know, I don't know if you do it in Canada. Any recommendations? Yeah. If they are filing solely in Canada, then they're going to have to do some research on this. A lot of times Canada tax law will mirror the US tax law, but I don't have any knowledge about Canada. However, if they are actually filing a US tax return, and so we've got some type of claiming US income, then there's some things that we can do about that. But that's going to have to really be structured very carefully. Okay. Good. Good. Good. All right. Well, listen, everyone's excited about the questions. Like I said, just make sure you subscribe to the channel. We'll give you the recording. If you're watching us later, we got, you got basically old Jerry's contact information to get up there. Give him a call. Get a free consultation. Worst thing can happen is that you learn something, you know, but I think this was more than, you know, more than, than we could ask for. So Jerry, thanks for taking the time of being in here, and we look forward to having you on here again. All right. Thank you so much. I look forward to being back. And thanks everybody for listening. And like I said, feel free to make sure and watch that recording and follow Jerry on his, his promotion that he's giving you. Thanks, everyone. Thanks for listening. All right. Bye-bye.