Your prop payouts get a 1099-NEC, not a 1099-B. That means federal income tax PLUS 15.3% self-employment tax. See what you'll actually owe — and how much an S-Corp could save you.
Disclaimer: Estimates only. Uses 2024/2025 federal SE tax rates and a flat ordinary bracket for simplicity. Actual tax depends on your full income picture, deductions, and filing status. Consult a licensed CPA.
Apex, TopStep, FTMO, Tradeify, Take Profit, and similar firms report your payouts on Form 1099-NEC as self-employment income. You owe federal income tax at your ordinary rate, plus 15.3% self-employment tax on 92.35% of your net profit, plus state tax. Deductible expenses reduce both.
Yes — the full 15.3% SE tax (12.4% Social Security up to the wage base, plus 2.9% Medicare with no cap), on top of regular federal income tax. This is the single biggest tax difference between prop trading and personal-account stock trading.
Often yes. An S-Corp lets you split prop payouts between a reasonable W-2 salary (subject to payroll tax) and S-Corp distributions (not subject to SE tax). For traders earning $80K+ in payouts, S-Corp election typically saves $5,000–$15,000 per year. The election goes on Form 2553 and only makes sense above a certain payout threshold.
No. US citizens and residents owe US federal income tax and SE tax on payouts regardless of where the firm is based. International firms typically don't issue a 1099, but the income is still required to be reported. The lack of a 1099 doesn't change what you owe — it changes what records you need to keep.