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?

[Anonymous_]

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/

[Anonymous_]

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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:

@Anonymous_ 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 

[mccooney]

He's looking for advice on whether Turbo Tax can help him establish the Mark to Market accounting of his trades that he elected for the tax year in question.  He's not looking for your OPINION on whether he is over his head or not.  

So, ANSWER THE QUESTION or give refunds to everyone you sold software subscriptions to since 2014.

Please answer the question!

[DawnC]

TurboTax can handle Mark to Market tax reporting for day traders.  @mccooney 

What is a trader of securities and how do I qualify for it?

How do I report my trader activity with or without Section 475(f) election in TurboTax?

[mccooney]

So let me get this straight.... You are staying Turbo Tax does not provide form 4797 nor does it support any way to address a mark to market election without the user manually preparing a form 4797 and, manually printing out their return to mail it in instead of the electronic option?  Do you also not allow for scanned PDF forms or scanned attachments to be attached to an electronic filing? (such as declaring a MTM tax election according to IRC 476(f)?  

If not, why not and if not then which one of your competitors does provide such support as it may behoove customers subscribing to that competitor and unfortunately having to absorb your fee for this year, albeit not electing Turbo Tax in the future.

[mccooney]

So, you're saying it does then?  Can you provide details on this because I have not seen it and I have been using Turbo Tax since probably its inception and looking for the MTM support for the past six years but not finding it.

One more thing,  when I refer to MTM, I'm not just taking about taking deductions for home office, margin interest, etc.  I'm talking about being able to write of the full amount of losses experienced in a tax year such as the individual way, way earlier asked about but received more of a lecture than an answer to his question.

[DawnC]

Yes, we do support it.   See this TurboTax FAQ.   How you report your activity depends on whether or not you have made the election.  TurboTax will prepare the forms, you do not have to manually do that.   @mccooney 

This thread is a few years old, so it may contain out of date information.  

Do I qualify as a trader or an investor?

What is a trader of securities and how do I qualify for it?

 

[mccooney]

Your links do not address the question.  They just address expenses around frequently trading securities or being a day trader.  Your links do not address the ability to classify your trading losses as MTM under IRC 475(f) where you can write off the full amount of any losses experienced in a calendar tax year, instead of being capped at a max of $3000.

So, how does Turbo Tax support what I am referring to?

[mccooney]

I already looked at the FAQ and did not find anything to address the MTM and IRC 475(f) section and supporting forms.  Can you be more specific please?

your link does not answer the question.

How do I report my trader activity with or without Section 475(f) election in TurboTax?

[DawnC]

From the FAQ:   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.  

Instructions for entering your trades with or without the election is included in the FAQ.   @mccooney