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?

[stech]

Hi all

I am day trader. How do I deduct my laptop expense? I get 1099-B from robinhood, which gets reported on Sch D. I have completed an Sch C for my other business for which I get 1099-MISC. I don't know how expenses related to 1099-B get reported on Sch C. Can somesone please post a sample for simple tax return?

If opened LLC, is that a better option? how does that get reported. I do have LLC for my other business. I pretty much know how to file that. But its confusing for active day trader.'

Thanks in advance!!

[cboizauer]

I have come to know how to do all of this.  It’s confusing.... So feel free to ask away.  

Step 1.  You have to qualify for trader tax status.  4 trades a day.  4 days a week average.  

Step 2:  all expenses get put on schedule c. The obvious is computers, desks.  But lots of others; internet, etc and the big one that is very confusing is the home office.  

Step 3:  get the grand total of expenses from schedule c.  Report this number as a negative number on the 1099 income.  Meaning create a new line item for short term gains as a negative number (aka a loss) to round off expenses from schedule c.  Do the same for home office expenses.  Meaning there should be two negative short term gains/losses reported on the capital gains worksheet to ‘even’ out the expenses.  If that makes sense .  It helps to make notes of this if you are sending in your tax return to explain it.  But that is not necessary.  

LLC.  I have an llc account and a personal account.  The llc marked under marked to market provides tax loss insurance for there is no 3k limitation.  And loses can be carried over to future years gains.  Also, by paying yourself a salary through the llc, you can write off health insurance premiums and solo 401k contributions at the end of the year.  This provides more tax relief but their Ian higher costs maintaining the llc (formation/state fees).  

[stech]

@cboizauer 

Is this what you mean? I created an dummy return to see how it will work

https://fromsmash.com/xR6l8t2QrM-et

[daboyzrule]

Let's assume someone qualifies for TTS but not MTM.  I assume all expenses are on Sch. C and all capital gains are on Sch. D. Income for Sch.C is 0. I'm not tracking step #3.

Can you clarify step #3? The online version doesn't  allow one  to record a negative number in "Other income" in Sch. C.

[cboizauer]

TTS is gained from having over 4 trades per day for 4/5 days out of the week.  MTM is something you would need to denote before april 15th 2020 for your 2020 retur (often sent in with 2019 return).

Track expenses on schedule C.  For arguments sake lets say these expenses equal 10k.

Go to schedule D and put a 10k loss to balance out these expenses.  Thus reducing the capital gains on schedule D.  

Let me know if you have any other questions 

[daboyzrule]

Thank you for the prompt response. I understand what you are saying conceptually. Looking at the 20202 Sch. D though, it's not obvious where you would place (10k) on it. There is a place holder for capital loss carryover for short and long term and it's setup to record a negative number. Is this where you would record it? Here's the link to Sch. D

[stech]

Someone said, I should open S Corp, that way all capital gain can be on 1120S then I can deduct my expenses. Otherwise having an single member LLC won’t help?

is this correct?

[cboizauer]

Put a new line item of your capital gains worksheet.  So it would be included in short terms gain (come off your short terms gains).  

[cboizauer]

Sole proprietors can deduct expenses on schedule C as long as the qualify for trader tax status (4 trades a day for at least 4 days a week).  

S corps can unlock 401k contributions and health insurance tax savings.  But that is complicated . You would need to pay yourself a salary as an employee of the s Corp to do so. 

[daboyzrule]

Thank you for the clarification. Much appreciated!

[cboizauer]

You use turbo tax ?  Have a home office you trade from ? 

[daboyzrule]

Started trading late 2019 and all through last year and built home office last year. Would like to deduct home office. Never used Turbo Tax. Have been using online version the last few days but seems limiting for folks wanting to do TTS. 

[cboizauer]

The home office expenses need to be deducted similarly to the way you are deducting expenses via schedule C.  Line item as a negative number on capital gain worksheet.  

If you rent ... this is a particularly big deduction and not one of it should overlook.  If you do not rent .. you are still able to deduct internet/water/power/building expenses/etc.  

Turbo tax is not set up for traders.  I use the CD version.  Not sure if there is a difference But I have figured all this out on how to fiddle with the program to reflect all the deductions properly.  
let me know if you have questions. 

[daboyzrule]

Agreed and am going the desktop route. Online versions are too limiting but I do understand their rationale. Having millions of people edit in forms mode online could lead to a lot of unnecessary issues down the road. Again, thank you for the insights.

[LinaJ2020]

The issue has been submitted and is currently under investigation.  Please click on the following link and sign up for an email notification when it's fixed.  

1099-B negative

A Form 1099-B is issued to report the proceeds from your stocks and bonds transactions.  The transactions will generate either a long term or short term capital gain or loss depends on how long the stocks are being held.  The amount will be reported on line 7 of your Form 1040 along with a Schedule D and Form 8949.