Thanks for your tax question today.
Since you have set up and S-Corporation, all of your income
will flow to your personal return
. If you are an active trader and elected to be treated as a trader, there are several issues you need to be aware of. In order to be a trader, you must be regularly and actively participating in trading, not just a few trades a day, but spending a few hours a day at the minimum. I will not go into a full discussion of whether or not you are a trader in this question.
You may have also elected to have your trades using the Mark-to-Market method. Being that you are unfamiliar with most of the basic S-Corp issues, I will assume you did not make such an election.
Any wage you pay yourself from the entity as an "employee" is subject to employment taxes (SE Taxes), such as Medicare
and Social Security. For 2013, this amount is 7.65% paid as a deduction
from your wage and an equal match from the corporation side. You must pay these taxes to the IRS
no less often than monthly, and reports are due quarterly
Since it is assumed all of your trades are short term in nature, there is no special tax treatment for these transactions
. Normally, a non-trade would classify this income as capital gains
and not ordinary income
. This would flow to your personal tax return
on Schedule D
, and is not subject to SE tax.
Your S Corp would also have no ordinary income, just capital gains, so there would be no money to pay a salary or a need in this case.
If you are an active trader, you could then treat all the income as ordinary in nature, and therefore pay yourself wages, and deduct ordinary expenses
against the income. The income or loss would then pass to your 1040 as ordinary income instead of capital gain income.
I cannot determine your tax burden
or whether it is better to take how much in salary versus how much in profit distributions because the calculations are not only complex, but require knowledge of all your other income
on your 1040, your personal situation, etc.
This is best done by spending some time with a tax adviser or CPA that you can hire and can represent you. It is not something that can be calculated on the back of a napkin because there are many decisions you need to make about how to handle certain issues.