Moving away from a home-based business may improve a company

There are definite advantages for day traders working from a home office. The flexibility and convenience of a home office eliminate the trouble of commuting to an office, which may be part of the reason many traders enter the field in the first place.

However, choosing to work outside of a home office can have positive implications. Small Business Trends reports many small business owners have had success working from a coworking environment, where other people are working around them.

A co-working environment can also assist in building a work-based social network. Working from a home office, the site says, can be an isolating experience for many. However, a setting where others are present can allow traders to make some of the connections necessary to expand the company.

Moving work to a location outside of home may also help day traders achieve some kind of balance in their lives, according to the site. Sometimes traders can get into the habit of working long hours every day, and always sticking around for just a few extra trades.

Working at a separate space can help traders maintain the balance between work and their personal life, reducing stress and improving their quality of life.

However, day trading companies that choose to work from a commercial office - no matter how small - also need to consider the potential tax implications of that kind of move. A professional tax firm may have accounting tips, which can help traders save money on the move.

Thorough estate planning still necessary despite recent changes

Legislative changes that raised the threshold for federal estate taxes may have led some of those day trading for a living to think they may not need a proper estate plan. However, Investing Daily says that could be a mistake.

According to the changes passed last year, estates worth less than $5 million are exempt from paying federal estate taxes. However, even those traders with estates worth less than that can still benefit from a living trust and complete estate plan.

For example, a typical situation would leave all of a person's assets to their spouse, and they would pass onto their children following the spouse's death. However, fewer families in the current day and age are traditional nuclear families, and determining how to deal with multiple spouses and children can be a complicated process.

Traders can also use a living trust to lay out what should happen if a potential is too young to manage their portion of the estate, or plan for potential hurdles which may arise.

It's also necessary to determine how probate courts will affect an estate. The source says while some states have well-managed probate court systems that are able to quickly resolve cases with little financial drain, others do not.

Traders are encouraged to discuss their situation with an estate planner and determine the best course of action for their particular situation, so their estate can be managed as efficiently as possible.

Professional representatives helpful for audits

For those day trading for a living, receiving a notice from the Internal Revenue Service regarding an audit can be a significant inconvenience. Despite many people who feel they can adequately represent themselves, Los Angeles Times columnist Karen Klein says it's a wise idea to hire a professional accountant to handle representation at the audit.

Day traders with professional representation should be able to quickly determine what kind of information the IRS is looking for, saving effort from all parties.

In addition, that also means it's not necessary for the trader themselves to be present during the audit, saving them time that could be better used for other purposes. That can also avoid the potential for a day trader to say something inadvertently, which could open them up to even greater tax liability.

If further examination shows an error was made in determining day trading taxes, Klein says experts feel it may simply be best to pay up without a fight.

"If an auditor raises an issue in which you clearly are wrong, concede the point. Owning up builds credibility and shows the agent that you are making a good-faith effort to comply with the law," Larry M. Elkin, president of Palisades Hudson Financial Group in New York, told Klein.

That good will, Elkin said, could translate over to other aspects of the audit. By showing good faith regarding the tax accounting mistake that may have occurred, auditors may be more likely give traders "the benefit of the doubt" in other situations.

Time may be more valuable than money

When running a company, Business Insider says many business owners feel that they can save a great deal of money by doing all of their management functions themselves. However, that train of thought, the source says, overlooks the fact that the time spent doing those things might be put to better use.

Many sole proprietors, the source says "make the mistake of trying to do everything themselves in order to save every penny." BI says it's not possible for people to be the best at everything, so business owners should focus on their own strengths, in this case day trading, and work to overcome their own weaknesses and liabilities.

Day trading for a living may place a great deal of strain on a traders' accounting and bookkeeping skills, which may not be their strong suit. By outsourcing that responsibility, traders can spend less time worried about their accounting ledgers and tax deductions and more time watching the market for the next score.

In addition to freeing up a traders' time, Business Insider adds working with a reliable partner for other services may also result in better quality work than they could have done themselves. In order to get a feel for a firm's way of doing business, and see the quality of work they produce, it may be a good idea to give them a small project as a start, and then grow from there.

Following these steps can ensure day traders don't spend unnecessary time doing tasks they could easily remove from their daily workload. By doing so, they can ensure they spend their time on what matters most.

Professional tax prep reduces audit probability

An audit from the Internal Revenue Services is one hassle people day trading for a living likely want to avoid at all costs.

For sole proprietors filling out a Schedule C for their day trading taxes, Fox Business says the chances of an audit are much higher than they would be for people working off of a W-2. To reduce that risk, the source says people may want to have their taxes completed by a professional.

Fox Business says the IRS is more likely to audit self-reported tax forms simply because they don't feel most people have as much of a grasp of the tax code, regardless of whether or not they do. Returns prepared by professional accounting firms carry more credibility with the agency, and may be less likely to be singled out for an audit.

The source added that in the event of an audit, day traders should make sure they have documentation to back up all the tax deductions made during that year. Home office and auto expenses are two of the most closely scrutinized categories of deductions, it says.

The source added day traders who officially incorporate their company as a LLC or corporation may also be less likely to be audited by the IRS. However, because these changes could have significant impacts on other parts of the company, business owners should have a full discussion with an accounting firm and lawyer before deciding to make any changes to the structure of the company.

Programs aside, small business accounting still difficult

Despite the widespread availability of relatively easy-to-use accounting software programs, entrepreneurial experts tell the Christian Science Monitor those who decide to do day trading for a living may want to work with an independent accounting and management firm to help get them moving in the right direction.

The source says even though do-it-yourself software programs can be relatively easy to work with once they are figured out, there is still a distinct learning curve as business owners get used to them.

"Do-it-yourself accounting tools may provide some assistance, but the entrepreneur will incur a learning curve and have to invest time in these sites when he should be investing time in developing the business," Vic Alexander, chief manager of a CPA firm, told the source.

In addition, Alexander says an accountant can be a valuable partner, helping traders choose the best business formation for their purposes, and set them up with bankers, attorneys or insurance agents they need to speak with. In addition, they can also set up performance metrics to help day traders stay on task, and assist with retirement planning and other aspects of their business.

CPAs and other accounting firms will also be up-to-date on any recent regulatory changes that may affect the tax breaks or obligations which a small day trading company might be impacted by. Keeping up with those changes can take even more time away from traders when they could be focusing on other things.