Home › Market News › Paying Taxes On Your Brokerage Account
When you take that first withdrawal, it’s really tempting to throw caution to the wind and drop it all on something nice. We get it; paying taxes on your brokerage account isn’t always something you think about when you have a pocket full of cash. Remember, though, at the end of the year, the taxman will want his piece.
In this week’s episode of the Coach’s Playbook, the Topstep coaches give a high-level look at some best practices when it comes to paying taxes on your brokerage account. Please note, the Topstep coaches are not tax professionals, and you should seek the advice of a licensed professional if you have any questions regarding how to pay your taxes.
As the Reddit army put the screws to anyone who dared to short GameStop stock, the broader markets remained relatively flat early in the week. On a day where the S&P 500 futures were held to just a 40 handle range, Funded Trader Sarah J. was able to catch a few of the smaller swings.
Sarah proved that you don’t have to trade big to make decent money, as long as you have a solid game plan and stick to it. You need to maintain a disciplined approach in order to take advantage of low volatility situations, and that’s exactly what Sarah did. After just a few small trades, she walked away with a respectable $1,200 profit for the day. That’s the way to do it!
As the coaches stated in the video above, if you traded at all during the year, you will be required to file taxes. It doesn’t matter if you win or lose, the IRS wants to know about it. Don’t forget, there are some benefits to trading futures over stocks. For instance, if you end the year with a loss, you’re entitled to write off a certain amount of your losses. Also, the IRS doesn’t consider trading profits to be Earned Income, so you don’t need to file self-employment taxes.
As tax season approaches, make a plan to consult a professional to help you take advantage of all the benefits. Or, at the very least, put some time into researching how to file your taxes correctly. We’re pretty sure nobody enjoys an audit, so get it done!
Because you are trading under the Topstep umbrella, the Internal Revenue Service (IRS) considers you an independent contractor. As such, both you and the IRS will receive a copy of Form 1099-NEC from us, which outlines any compensation paid out to non-employees of a company.
Because you are trading our capital, you can treat your Funded Account® as a business and deduct any expenses related to your trading. To deduct expenses, you will need to report your income earned on a Schedule C form and include the expenses to get an adjusted taxable net income.
A few examples of possible tax deductions include data fee payments, home office, tax advice/preparation, and bank fees. Please note that the IRS will likely NOT consider the Trading Combine® a deductible expense.
As of January 31, 2021, your tax forms have already been filed with the IRS and mailed to you. You should have received them on or around February 19, 2021. If you have not yet received your tax forms from us, or if the information on the tax forms you received is inaccurate (name, address, tax ID, and the amount paid in 2020), please let us know as soon as possible.
Topstep is NOT required to report any tax or payment information to your country’s government, so you will NOT receive any tax forms from us. However, we are happy to provide you with a summary of your payouts should you wish to report it to your local government.
Nothing says Happy New Year quite like tax reporting! We know the added stress can sometimes be overwhelming at this time of year, so we want you to know that we’re here to help and provide you with important information about tax filings and requirements.
A copy of your 1099-NEC from Topstep has already been filed with the IRS. Please contact Kelsi if you have any questions or have not yet received your tax forms. Please remember to check your tax documents for accuracy when you receive them (name, address, tax ID, and the amount paid in 2020).
The same standards apply as Funded Traders who are not U.S. citizens and live outside of the U.S. Topstep is NOT required to report any tax or payment information to your country’s government, so you will NOT receive any tax forms from us. However, we are happy to provide you with a summary of your payouts should you wish to report it to your local government.
While Topstep cannot provide tax advice, we are here for any questions you may have about the forms and filing times.
Stay safe and trade well,
The Topstep Team
Trade Well!
