Will Turbo Tax work if I am a full time trader in commodities (self employed), formed a sole proprietorship LLC in May, and elected Mark to Market (IRC 475) accounting?

[DawnC]

You can't contribute to a SEP without self-employment income.   @spencer00

You only need to enter SEP IRA contributions made through self-employment work. If your employer made a SEP IRA contribution for you, then you don’t need to enter it in your return. (While you could contribute more to an employer-sponsored SEP IRA, TurboTax doesn’t support these contributions.)

Before you enter your SEP IRA contributions, first make sure you've entered self-employed income. This allows us to calculate the maximum amount you're allowed to contribute to your SEP IRA.

The contributions you make to each employee's SEP-IRA each year cannot exceed the lesser of:

1. 25% of compensation/SE income, or 
2. $58,000 for 2021 ($57,000 for 2020 and subject to annual cost-of-living adjustments for later years).

[spencer00]

Thank you for your reply. Where on turbo tax able enter self  employed income ? As a full trader per Irs criteria, a trader is also entitled to set up a qualified retirement plan if the capital gain made . Problem here the gain entered Sch D. Not sure how to handle this issue. Thx

[DawnC]

If you are a trader, and you have not made the Mark to Market election, you report your trades on Schedule D as you have indicated.   But dividends and interest and other expenses of your business are reported on Schedule C.   You are in the business of trading securities, so all business-related expenses and income are reported on your Schedule C.   When you elect Mark to Market, you use Form 4797, Sale of Business Property and your gains become business income which counts toward SE income for the purposes of making SE retirement account contributions. 

To create a Schedule C, use this link.  

Your trading activity is still reported on Schedule D, so your SE retirement contributions and health insurance premiums deductions are dependent upon your SE income, which for a trader without a Mark to Market election is limited to dividend and interest income.   If you had an S-corp, you could pay yourself a salary and use that earned income to contribute to a SE retirement plan.    But with your gain income reported on Schedule D, the income cannot be considered self-employment income.     @spencer00 

[largib]

@DawnC @spencer00 I guess I have the same question as @spencer00 : just trade tax status (TTS) but no MTM (Mark to Market). My question is that even though trading income is reported in sch D for TTS with NO MTM, there is NO reason for the IRA not to allow to enter the trading income in the trading business of sch C. 

So again, for TTS with NO MTM

1). Is the restriction of only including dividend & interest in sch C. a restriction only by Turbotax, not really by IRS, correct?

2). Can I include some or all trading income from sch D to sch C so that I can have more SEP IRA, qualified business income deduction & even health insurance premium deduction? I don't mind paying more SEI (Self employment income) tax here. Again, I understand this might not be possible (or automatic) using Turbotax (even desktop), but maybe there is a way to simply 'move some trading income' to sch C manually in Turbotax desktop to do so? If there is one, anyone knows how?

Thanks and I'm pretty sure that's what @spencer00 and probably many are asking. 

[JBJD]

@DawnC is there a way that you can complete my taxes?

[KristinaK]

If you have TurboTax Live, you can use the Full Service offering to have your tax return prepared. 

Please read more about it here.

@JBJD

[JBJD]

Except I tried that and they weren't aware on how to file as a trader, nor elect section 475, nor deal with section 67e deductions. Plus they told me that I couldn't write off trade related expenses. So I had them cancel the live session and revert me back to the normal online session. When some one looks at your 1099b and says you have a 400k loss, you know you arent going to find the help you are searching for. 

[DawnC]

 You can make an adjustment to your Schedule C income in order to take a home office deduction as long as you are using the desktop software, as you will need Forms mode for the manual entry.  

If you have not elected and submitted the Mark-to-Market (MTM) accounting method, then go to Forms Mode to view your Schedule D.   Line 16 of Schedule D will show the overall gain or loss being reported on your return.  If you did not report any transactions during the year as an ‘investor’ and Schedule D shows only your gains/losses from being a ‘trader’, then line 16 is the amount you use in the home office instruction below.  Otherwise, you must do some math outside of your return to determine only the overall gain/loss from transactions associated with your business as a ‘trader’.  Transactions as an investor (for example, selling a long-term holding) cannot be considered to be income associated with your business as a trader.

For traders who claim a home office on their Schedule C, a manual adjustment must be made to show that the trader business had a gain for the year.  Otherwise, the home office deduction is disallowed.  Use the following steps to make that manual adjustment:

• In Forms Mode, go to Form 8829
• Scroll to the Line 8 Calculation Smart Worksheet
• Enter the ‘trader’ gain amount (referenced in the instructions above) on line C2

From <Link to Annette's full instructions>  

@JBJD  

@largib

@spencer00

[JBJD]

You seem really knowledgeable. I tried live again yesterday and they said they cant do it if there is more than 1 schedule C. Not sure if true, but looks like Im going to have to do this on my own. Do you know the process of filing as a trader who has not elected 475 yet? 

[DaveF1006]

Yes; TurboTax can certainly handle the type of return required for a self-employed commodities trader. Essentially, after declaring yourself as a securities trader (if you objectively meet the criteria) you will then need to print and file your tax return on paper (not e-file) and attach a statement to the back of it declaring what is known as an IRC (Internal Revenue Code) Section 475(f) election. 

Next, you will enter your business expenses as a securities trader on a Form 1040 Schedule C, inputting your expenses only and showing no income from this particular business activity (i.e., trading).  Finally, you will manually add a Form 4797 to your tax return, and enter your net total gain / loss in Part II of Form 4797, using the TurboTax smart worksheet.

Please note that you will want the TurboTax desktop software to correctly do this; the TurboTax online program will not be adequate, because you will not have access to the "Forms Mode" of the software to add the 4797. Please review this IRS link for more information about this election.

';l

[Bella50]

Agree, when you e-file, there is a section where you can attach documents. This is where my CPA attached my MTM election statement. He had no issues with it. hope this helps.

[spencer00]

You mean your Cpa did e file and mail Mtn attachment or Mtn attached to r file ? Thx

[Bella50]

MTM statement document uploaded with the efile and sent to IRS all electronically. No need for paper mail. 

[section4]

Any instructions for how to fill Form 4797? Schedule D? Form 8949?

Does TurboTax help me fill it?

[DianeW777]

No, however TurboTax has all you need to file with this situation.  This is a manual entry of Form 4797 so included here are the instructions provided earlier in this thread.  

Per @DaveF1006

"TurboTax can certainly handle the type of return required for a self-employed commodities trader. Essentially, after declaring yourself as a securities trader (if you objectively meet the criteria) you will then need to print and file your tax return on paper (not e-file) and attach a statement to the back of it declaring what is known as an IRC (Internal Revenue Code) Section 475(f) election. 

Next, you will enter your business expenses as a securities trader on a Form 1040 Schedule C, inputting your expenses only and showing no income from this particular business activity (i.e., trading).  Finally, you will manually add a Form 4797 to your tax return, and enter your net total gain / loss in Part II of Form 4797, using the TurboTax smart worksheet."

• IRS Topic 429-Traders in Securities
• This provides the information to enter on your statement that is attached to the return.  Simply stated you can use the following statement:
  •  Statement of the mark-to-market election under Internal Revenue Code section 475(f) for a trader in securities. 

You must use TurboTax CD/Download version (not TurboTax Online) to complete your tax return and the information posted here for your convenience.

• You will manually add a Form 4797 to your tax return, and enter your net total gain / loss in Part II of Form 4797, using the TurboTax smart worksheet.
  • Switch to Forms (upper right) > Type 4797 > Press Enter > Select the forms and worksheets for Form 4797

@section4