I am a day trader with an S corp set up solely for trading. I am wondering if I need to file a Schedule D and form 8949 to report gains and losses (both stock options and futures trading) or just may report it as income or loss on schedule 1120S and as ordinary business income in Schedule K-1 (not under capital gains and losses). The amount this year is a small gain (@ $550). I had a preparer do it last year without the Schedule D and a preparer this year who used the Schedule D. Thanks for whatever help you can offer.

So, you opened a Stock trading Acct under S-corp name, day trading as an S corp. using S-CORP funds.You have some "short term" capital gains. Generally, an S corp is exempt from federal income tax other than tax on certain capital gains and passive income, instead, an S-Corp passes-through profit (or net losses) to you ower/shareholder/EE. The business profits are taxed at individual tax rate on your Form 1040. You need to use Form 1040, Sch D/form 8949 to report your short term capital gains from the sale of financial instruments .So, With an S-corp, all profit passes through to the business owner, which means that you will pay personal income tax rates on all earned income. Since capital gains are handled at the corporate level with an S-corp, the IRS taxes earned income and capital gains at the same rate( no special LTCG tax rule). So, as said above, yoour S corp is a flow through entity. The S corp itself, while it files its own tax return each year on 1120S, typically pays no income tax. The net income (revenue less deductible expenses) on your 1120S flow through onto your S corp AAA and stock basis and personal return (1040). This is accomplished by preparing a K-1 tax slip that indicates the amount of net income and other relevant information that is reported on your personal return. That's how a typical S-Corp works. However, as a major tax planning item, the corporation can pay you a reasonable salary (subject to FICA) and a distribution (which isn't subject to FICA). This can represent a huge tax savings in the amount of FICA you must pay each year.

Thanks so much for your detailed response. I really appreciate it. Still not quite clear, however, can the S corp just report trading activity as regular income without having to file a schedule K as part of the S corp return? Thanks so much again for your response.

You need to report the STCG that is portfolio income from Sch D/ 8949 on line 7 of Sch K of 1120S. You have some "short term" capital gains as a S corp day trader. EYou need to report the STCG that is portfolio income from Sch D/ 8949 on line 7 of Sch K). Generally, an S corp is exempt from federal income tax other than tax on certain capital gains and passive income, instead, an S-Corp passes-through profit (or net losses) to you ower/shareholder/EE. The business profits are taxed at individual tax rate on your Form 1040. You need to use Form 1040, Sch D/form 8949/ SchK-1 of 1120S(part 3 box 7)/1040 to report your short term capital gains from the sale of stock