Trader Tax Questions. Answered.

Yes — absolutely. International firms like FTMO, Tradeify, and many others don't send 1099 forms. But all income is taxable regardless of whether you receive a tax form. US citizens and residents pay tax on worldwide income. Failing to report prop firm payouts — even from foreign firms — is tax evasion. The IRS is increasingly cross-referencing payment processor data, so non-reporting is not a safe strategy.

Yes — all prop firm fees are deductible as ordinary business expenses for traders who qualify as self-employed. This includes evaluation fees, challenge fees, reset fees, monthly subscription fees, and upgrade fees — even if you failed the evaluation. These fees reduce your net self-employment income, cutting both income tax and self-employment tax. See our full guide: Can You Deduct Prop Firm Evaluation Fees?

All prop firm income is reported together on Schedule C as a single self-employment activity. You don't need a separate Schedule C for each firm. Your total payouts from all firms are added up as gross income, then your total prop firm expenses (all fees across all firms) are deducted to arrive at net self-employment income. Keep records of each firm's payouts and fees separately for your own documentation.

The standard federal tax deadline is April 15, 2026 for the 2025 tax year. You can file an extension to October 15, 2026 — but an extension to file is NOT an extension to pay. If you owe taxes, you must pay an estimate by April 15 to avoid underpayment penalties.

Critical trader-specific deadline: March 15. The S-Corp election must be filed by March 15 to be effective for the current tax year. This deadline has already passed for 2026 — contact us about planning for 2027.

The MTM election must be filed by the due date (including extensions) of your prior year tax return. To have MTM in effect for the 2026 tax year, you must file the election by April 15, 2026 (or October 15, 2026 if you file an extension for your 2025 return). This is one of the most important and most missed deadlines in trader taxation. Learn more about the MTM election →

If you expect to owe more than $1,000 in federal taxes for the year, you're required to make quarterly estimated payments. For prop firm traders and self-employed traders, this is almost always the case. The 2026 due dates are: April 15, June 16, September 15, and January 15, 2027. Failure to make quarterly payments results in underpayment penalties — typically 8% annualized on the shortfall. A simple rule: set aside 25–35% of every prop firm payout in a separate savings account.

Yes — we file amended returns (Form 1040-X) for prior years. You can generally amend returns up to 3 years back. This is especially valuable for traders who filed prop firm income as capital gains, missed the MTM election, didn't claim deductions, or had incorrect Section 1256 treatment on futures. Amended returns are available as an add-on service. See pricing →

Active traders who qualify for Trader Tax Status (TTS) can deduct: trading platform and charting software, market data subscriptions, trading education, home office (dedicated trading space), all trading equipment (monitors, computers, keyboards), internet (business-use percentage), prop firm fees, professional fees (CPA, attorney), health insurance premiums, and retirement contributions (Solo 401k up to $69K, SEP-IRA up to 25% of net SE income). See the complete deductions list →

Trader Tax Status (TTS) is an IRS designation for traders who trade as a business rather than as investors. Qualifying for TTS unlocks full business expense deductions and the ability to elect Mark-to-Market accounting. General criteria: 720+ trades per year, short holding periods (days/hours, not months), consistent trading throughout the year, and profit motive from short-term price movements. The IRS has no bright-line test — it's a facts-and-circumstances determination. Our network of tax professionals review your trading history and document your TTS qualification as part of our service.

As an investor: you can deduct up to $3,000 in net capital losses against ordinary income per year. As a TTS trader with MTM: trading losses are ordinary losses — they can offset 100% of your W-2 or other income with no cap. This is one of the most powerful reasons to establish TTS and elect MTM if you have significant trading losses. Full guide for losing traders →

No — you don't need an LLC to trade. An LLC primarily provides liability protection and professional credibility. From a tax perspective, a single-member LLC is a disregarded entity — taxed identically to a sole proprietor. The tax benefits come when you add an S-Corp election on top of the LLC. If you're earning significant trading income, an LLC with S-Corp election is worth evaluating. Full LLC vs S-Corp comparison →

The savings depend on your net self-employment income. An S-Corp splits your income into salary (subject to SE/payroll tax) and distributions (not subject to SE tax). On $100,000 net income with a $50,000 salary: SE tax on salary only = ~$7,650 vs. SE tax as sole proprietor = ~$15,300. Annual savings: ~$7,650. Minus S-Corp maintenance cost (~$2,000–$3,000/year) = net savings of $4,000–$5,000+. S-Corp generally makes sense at $80,000+ in net SE income consistently.

The IRS treats crypto as property — similar to stocks. Short-term gains (under 1 year) are taxed as ordinary income. Long-term gains (over 1 year) get preferential rates (0/15/20%). However, every crypto transaction is taxable — including trading one coin for another, using crypto to buy goods, and receiving staking/DeFi rewards as income. The reporting requirements have significantly expanded in 2026 with Form 1099-DA. Full crypto tax guide →

Section 1256 contracts (ES, NQ, CL, GC, and broad-based index options like SPX) receive automatic 60/40 long-term/short-term tax treatment regardless of holding period. This means even trades held for seconds are 60% taxed at long-term rates. At the top bracket, this reduces the effective rate from 37% to ~26.8%. Futures are also exempt from wash sale rules and losses can be carried back 3 years. Full futures tax guide →