Do I need to file paper attachments for form 4797 transactions along with Form 8453?

[rajeshh]

Hello - I am e-filing using TT for 2022 Tax year as MTM Trader ( Ist year as MTM). I have the transactions that support the entries on 4797. Do I need to send these in paper along with the Form 8453? I don't see a checkbox on Form 8453 to check Form 4797. 

Wrt Form 3115 - This is the first year of filing as MTM, so I do see a checkbox on form 8453 indicating Form 3115 needs to be sent. Should I include a copy of the transactions for the Sec 481(a) adjustment?

I also need to send a duplicate signed copy of 3115 to the IRS National Office. Should I include a copy of the transactions supporting the Sec 481(a) with this copy as well?

[rajeshh]

Found this post, https://ttlc.intuit.com/community/taxes/discussion/re-first-year-active-trader-mark-to-market-how-to...

according to which it says I should not e-file, but send everything as paper? I was hoping I could efile and just attach the transactions with Form 8453 ( like one could do the 8949)

[GeorgeM777]

No, you won't be filing Form 8453 with your documents because you won't be able to e-file your return.  Form 8453 is only used in connection with e-filed returns.  Because you are a MtM trader, you have to attach a statement to your return using the same format as line 10 of Form 4797, showing the details of each transaction. TurboTax does not support the creation or importation of the trader's statement. Thus, you will need to separately prepare your statement and attach it to your return. Your completed return will need to be paper mailed to the IRS.  

Because you will need to paper mail your return, you can include Form 3115 with your return.  

@rajeshh 

[rajeshh]

@GeorgeM777 Thanks for the response. Can you answer my other question -

Should I include a copy of the transactions supporting the Sec 481(a) with the copy  of Form 3115 to the IRS national office as well?

[LindaS5247]

This is what is listed as what must be included with Form 3115:

Filling out this form requires the following information:

• Name
• Address
• Identification number
• Phone number
• Signature
• Applicant type
• Tax year information
• Accounting details
• Totals

You also attach several supporting documents such as your business’s income statement, balance sheets from the previous year and any adjustments you made. The final attachment is a statement specifying the accounting method you used while preparing your sheets.

Click here for Instructions to Form 3115.

[rajeshh]

Sorry, you did not answer my specific question. Can you please answer my specific question?

[AnnetteB6]

The second copy of Form 3115 sent to the IRS National Office should not require a copy of the Form 4797 transactions.

If you prefer to include them just to be sure, that would be OK.

@rajeshh 

[rajeshh]

Thanks. I wasn't asking about 4797 transactions, rather the transactions from 2021 ( the year before MTM) which carried over into 2022 and is a one time adjustment that I report on Form 3115. This is referred to as Sec 481(a) adjustment.

[GeorgeM777 · Accepted solution]

Yes, include a copy of the transactions supporting your 481(a) adjustment that you will send to the IRS.  The line 26 (Part IV) instructions for Form 3115 provide the following about the 481(a) adjustments:

Attach a summary of the computation and an explanation of the methodology used to determine the section 481(a) adjustment. If it is based on more than one component, show the computation for each component.  If the applicant waived any deductions with respect to the method of accounting pursuant to Regulations section 1.59A-3(c)(6)(i), include a summary of the waived deductions.  If more than one applicant is applying for the method change on the application, attach a list of the (a) name, (b) identification number, and (c) the amount of the section 481(a) adjustment attributable to each applicant.

Because you are mailing more than several documents, keep your mailing receipt and include a list of all enclosures on your mailing receipt as evidence of what you sent to the IRS.  

@rajeshh 

[rajeshh]

Thanks. Thats helpful. When you say include list of enclosures on mailing receipt, do you mean the USPS certified mail receipt?

[GeorgeM777]

Yes.  It is a wise decision to send your documents via certified mail.  In the event the IRS raised a question about whether certain forms/documents had been received, at least you will have some record (and a contemporaneous record in that you created it on or about the time you mailed the documents) about the forms/documents you enclosed with your certified mailing.  

@rajeshh