topic Where can I enter 475 MTM active trader income in Business & farm

Where can I enter 475 MTM active trader income

Angeli — Thu, 31 Dec 2020 04:37:31 GMT

if the K1 schedule is from LLC elected as a partnership

the K1 Schedule from LLC elected as a S-Corp.

I would like to know where this income will be at those K1?

And

Can I contribute to solo 401K, SEP IRA, or even Roth IRA for those income in K1?

Re: Where can I enter 475 MTM active trader income

M-MTax — Thu, 31 Dec 2020 05:43:16 GMT

What? Those are different forms....one is a 1065 and the other is an 1120-S.

Re: Where can I enter 475 MTM active trader income

Mike9241 — Thu, 31 Dec 2020 06:43:48 GMT

for a 1065 k-1 it would go on line 11 other income. it needs to flow to part II line 10 of form 4797

for a 1120s k-1 line 10 same rule for following to 4797

You will have to have earned income in order to qualify for a retirement plan. However, your trading gains aren’t considered to be earned income and are exempt from Self Employment tax (Social Security + Medicare). The exception to this is futures traders who are full-fledged dealer/members of options or futures exchanges. Therefore, in order to qualify for a retirement plan and make contributions to the plan, traders will need to use entities like an S-Corp trading company and issue payroll for themselves. It's the payroll that's earned income.

A caveat with all retirement plans is, if you want to set up retirement plan for yourself, you will also have to cover all employees in your company and other affiliated service groups, such as a related entity you own. For traders who own most of the equity in another business that hires employees, they can’t set up a high deductible retirement plan for themselves in a trading entity without also offering a similar employee benefit to their employees in that other business, too. There are, potentially, ways to limit this requirement which your attorney or tax advisor can explain.

Re: Where can I enter 475 MTM active trader income

Angeli — Thu, 31 Dec 2020 07:50:29 GMT

I enter "other income" as you said on my K-1 in Turbotax. However, this income does not flow through to other forms in my tax return. Am I missing something?

Re: Where can I enter 475 MTM active trader income

Angeli — Thu, 31 Dec 2020 07:52:33 GMT

For retirement plan, I am just one person. I can formed single member LLC and do a solo 401K right?

Or LLC elect to be taxed as S-Corp, pay myself W2 income and contribute 20% of my W2 income to SEP?

Re: Where can I enter 475 MTM active trader income

Mike9241 — Thu, 31 Dec 2020 11:34:24 GMT

there is a subcategory for other income - don't know if it's available on the version you are using but

if it is for a partnership you should eventually get to a question about the type of income on line 11 (1065 k-1) you should check the 751(b) box. then enter the amount. these instructions are for 1040 k-1 not the preparation of the 1065 return.