Tax Law (Questions About Taxes)/Trading/Investing on Social Security Disability
Please excuse me for asking this question privately as I don't feel comfortable making my disability status and mainly mentioning a partial amount of my inheritance public, which might be viewable to hackers.
I am drawing monthly SSDI checks and was told by SSA I could profit or gain all I wanted when investing or trading as long as I was doing it for myself,(not family or public), and not in business as a broker or employed by a broker when I asked them about my investing some inheritance money.
I began investing in June 2012 learning fundamentals and technical analysis online. Since it's tax time, I began wondering if I should have reported monthly or quarterly to the SSA, my trading from June, 2012 through December 31st, 2012. Starting with $40,000 I had 84 purchases and 58 sells during this period for a profit of only $369.00 and not a single day trade. I called SSA and they've scheduled me for an appointment with a claims rep. at my local office in early April to hopefully discover how they want to view my past trading income as earned or unearned. They claim the local SSA office claims rep. can give more in-depth answers.
I have understood from a rep. by telephone to the national SSA Office that as an individual investor and not an active trader, or in business as a trader, my gains would be considered unearned income.
Since I am not technically in business trading and having a slight amount of unearned income from my more hobby-like, sporadic, short-term type of trading, then should I really report any, what I would assume unearned income from trading at all to the SSA? Then again, reporting it to the SSA is the only way I may know for sure if they consider my trading earned versus unearned income, and not be surprised by a big tax surprise later. Unearned income will not affect my disability checks.
Thank you for any clarification.
I look forward to finding out what you get from the "Local SSA Claims Rep" since you going to talk to them about "NOT A CLAIM" I doubt they will have authoritative answers for you and they will have a personal agenda. I can't say what their personal agenda will be, whether it is:
1. try to get some money for the SSA,
2. try to adjust your monthly so as to save the SSA some money,
3. maybe even see if there is a way to give you more, or
4. apply the regulations correctly.
You laid out the regulations.
Let me give you a few more items to fill in any empty spots in the picture.
IF you were intending to deduct expenses from your trading; that would turn it into a business. As you pointed out, that would affect your benefits. Don't do that.
IF you intended to deduct expenses you would have to register as a "qualified trader"; you would have to calculate self employment taxes and file quarterly with the SSA. You aren't going to do that.
And just because I have a uncontrollable need to be complete and look down the road when I answer questions:
If your trading become successful. . . successful enough that the trading income would exceed the costs, then I would suggest that YOU quit trading. That a real corporation start trading and that you YOU make trading decisions for that corporation for free. At that point the corporation can deduct all the expenses, have other expenses, and will pay drastically lower taxes on any gains that are realized.
As long as you do not receive payroll income from the corporation that also will NOT affect your benefits.
All of that will result in MORE MONEY.