If you qualify as a trader, you have two ways to report your income:
- If you have not made a Section 475(f) Mark-to-Market (MTM) election, then your trades are reported on Schedule D and Form 8949.
- If you have elected a Section 475(f) Mark-to-Market (MTM) election, then your trades are reported on Form 4797.
Without the election, gains and losses are recognized when the security is sold. They are treated and taxed as capital gains and losses and are subject to capital gains tax rates, as well as the limitation of losses and the wash sale rules.
With the election, gains and losses are based on the value of your holdings at year-end. It's treated and taxed as ordinary income. The limit on losses and the wash sale rules don't apply.
If you have made the election, here's How to Report Day Trader Activity.
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