I am a day trader. How, exactly, do I report my investment income ($50,000 in losses, actually) into TurboTax, so that I can capitalize on the full range of deductions?

[tagteam]

Yes. If you try to use the simplified method with zero income, TurboTax will flag that (i.e., will not allow the deduction).

[ghappy21]

This tread about deducting Trader Tax Status expenses is very helpful.  It seems to talk about two approaches. One approach is moving the Sch C expense to Sch D as a negative transaction.  The other approach seems to be moving income from Sch D to Other income on Sch C.  Both resolve to the same end result. I wonder if one is more acceptable?

[imanuel]

Make Schedule C Look Better

The IRS may view a trading business’s Schedule C as unprofitable even if it has significant net trading gains on other forms and is profitable after expenses. 

To mitigate this red flag, transfer a portion of business trading gains to Schedule C “Other Income” (not revenue) to zero the expenses out but not show a net profit. 

https://greentradertax.com/category/trader-tax/

[tagteam]

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@imanuel wrote:

To mitigate this red flag, transfer a portion of business trading gains to Schedule C “Other Income” (not revenue) to zero the expenses out but not show a net profit. 

https://greentradertax.com/category/trader-tax/

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Please enlighten us. Perhaps email this firm and inquire as to which Code section, Regulation, court case, et al., they are relying on for this treatment.

If they can cite nothing, it is wrong.

[d2022d]

This thread is enlightening but has presented 3 alternatives that make it confusing as to what the right method of reporting in TurboTax online edition is. This is a sample example with random but relatively correct values:

Have capital gains from *investment* activities: $5k
Have capital gains from *daily trading* activities: $50k
Have capital loses from *daily trading* activities: $20k

Have business expenses for *daily trading* activities: $20k
Want to additionally get home office deduction for the *daily trading* activities (unknown at this point but let's consider both cases when it's less or more than the "profit" from the daily trading considering all other expenses).

Additionally, it looks like there should be no self-employment tax for *daily trading* business activities, per Tax advice for clients who day-trade stocks:

"Although a day trader who qualifies as a trader in securities is considered as being in the business of buying and selling securities, the trader is not subject to self-employment tax on gains and losses on his or her sales of securities."

Given all of the above:

@tagteam what is the correct way of reporting these in TurboTax online and ending up with correct calculations?
Thanks.

[gonzalezcmg]

I have a similar question.  I am a Day Trader with Mark-to-Market reporting for years.  I manually do my taxes carefully separating Investments Securities from my Trading Business.    I want to use a software package to make my tax preparation easier.  I am currently looking at TurboTax Home and Business as a possible Solution.  I see where I can download my Investment Securities 1099-B directly from my Brokerage Account.   Where do I download my 1099-B from my Tading Securities?  The Business Section does not show it!

 I see Business Income & Expenses but do not see the way to download directly from my Brokerage Account!  Any recommendation to relieve the drencher of manually dealing with Form 4797 and the like?

[GeorgeM777]

While you can import into TurboTax your transactions from your securities account (investment account, non-MtM account), the transactions you effect in your MtM account cannot be imported into TurboTax as those transactions--as you have noted in your post--get reported on Form 4797.  If you decide to use TurboTax Home & Business, you will need to use the download version as you will have to go into Forms mode (upper right of your screen), select Form 4797 from the list of forms in the left margin, and manually report on line 10 of Form 4797 all gains and losses from sales and dispositions of securities or commodities held in connection with your trading business. TurboTax does not support, in its step-by-step question and answer format, the information that you will need to enter on line 10 of Form 4797.  Forms mode is not available in the online version of TurboTax.  

Moreover, TurboTax does not support the Trader's statement, which shows the transaction detail that supports the gross amount on line 10, that Trader's must attach to their return. 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.  

@gonzalezcmg