Thee 475(f) election

[rsherry8]

A friend of mine is thinking about making the 475(f) election when he/she filed her 2025 income tax return. I understand the election would start applying in 2026. The primary benefit for the friend would be that the wash rule would go away. However,  I have some concerns. Here they are:

    1) Can TurboTax generate the form needed to make the 475(f) election?

    2) If the election is made in 2025, can my friend still use TurboTax to file his/her 2026 tax return?

    3) Is it going to very complicated to file her 2026 tax return? My friend has about 2000 trades a year.

    4) Is it an audit risk?

[M-MTax]

You and/or your friend should read the material at the links below.

https://www.irs.gov/taxtopics/tc429

https://www.thetaxadviser.com/issues/2010/feb/sec475mark-to-marketelection

[M-MTax · Accepted solution]

Also, I don't believe TurboTax can handle this scenario EXCEPT in Forms Mode which requires the use of one of the desktop products.

The returns and accounting are more complex than without the election. 

[Mike9241]

something not mentione in the links. if the person is already a trader, then they must also file form 3115 for a change in accounting method.

1) no. the return will need to be paper filed and file it early enough so the 4/15/206 deadline is not missed

2) yes

3) each trade is supposed to be reported separately on form 4797 line 10. Some preparers ignore this. Turbotax will not be able to import the transactions

4) dom't know. 

with 475(f) there are no wash sales but the cost is that the trades are treated as ordinary income or loss. not really that bad since a trader would normally have most short-term trades. 

[M-MTax]

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@Mike9241 wrote:

3) each trade is supposed to be reported separately on form 4797 line 10. Some preparers ignore this. Turbotax will not be able to import the transactions

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Well, they report on a statement in the same format as 4797 which is attached to the return and then has to be paper filed with TurboTax. 

[M-MTax]

Here's a TurboTax Article on this:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/income/report-trader-activity-without-se...