To report you day trading activities as a business you will report your income and expenses in TurboTax as a business. Go to:
In this section you can report all of your income and expenses from your day trading activities.
What Is a Schedule C IRS form?
@bodusale
But the income is the gain in the trading activity, i.e. buy and sell stocks. The is reported in schedule D. I can't double enter my income in Schedule C. So the Schedule C, the income is ZERO.
When the income in Schedule C is ZERO, TurboTax will not allow my home office expense. What should I do? Thanks, -John
Or, maybe the question is how not to enter the trading gain/loss in Schedule D, but enter in Schedule C in TurboTax. When I imported 1099 info from my broker, TurboTax automatically put it in Schedule D. Thanks
For your situation, your best bet (and most accurate and tax-friendly to you as well - most importantly) is to delete the imported information and enter manually into your Schedule C. This would be the same as if you had a company that you were using, say, Quickbooks for, as the end result of Quickbooks work done on your part would be the information you would transfer/enter into the tax prep software for your return. Since the 1099 is a B, and not an NEC or MISC, that is why TurboTax is automatically directing it to the Schedule D, where as usually you would input yourself and then select where the 1099 belongs. It is a little more work, but again for your situation it is the most effective way to get the accuracy of taxation - and the added benefits you are looking to gain (and pains that you're also looking to avoid).
Report it in a fashion similar to how the Professional Trader would do it.
enter a Schedule C
Then attach your transactions details for the calendar year to your return.
Like a Professional Trader you must file a paper return.
if you have no profit and expense deductions are denied, that's the name of the game.
Thank you, WendyN2.
Did you mean i will go to Forms directly, instead of using Q&A, in TurboTax? Will TurboTax still do all the other calculations for me?
Can I use what you suggested WITHOUT using the "Mark-to-Market" method?
Thank you, fanfare.
Did you mean I just use a "one line summary" in Form 4797, and attach another file with the trade information from 1099-B?
And also will the TurboTax Premier still work? Or do I have upgrade to TurboTax Home & Business? Thanks again.
It depends. If you are using TurboTax CD/Download Premier, then you can use that version for your Day Trader business. It also matters whether you decide to be a Day Trader in securities or whether you choose to be an investor. As a Day Trader, using the Online version would require an upgrade to TurboTax Self-Employed.
Day Traders can choose to use the mark-to-market rules, investors cannot.
If a Day Trader doesn't make a valid mark-to-market election under section 475(f), then he or she must treat the gains and losses from sales of securities as capital gains and losses and report the sales on Schedule D, Form 1040 (or 1040-SR). And the required Form 8949, Sales and Other Dispositions of Capital Assets as appropriate. When reporting on Schedule D, both the limitations on capital losses and the wash sales rules continue to apply.
You must decide how you want to report your income, as a Day Trader or an Investor.
Thank you so much, DianeW777.
First to answer your question - I am using TurboTax CD/Download Premier, and I am a Day Trader, not an investor. And also, I did not choose to use the Mark-to-Market method.
So just to confirm, since I didn't elect mark-to-market, I have no choice but to use Schedule D and Form 8949 to report my trading activity, and, therefore, I CANNOT use schedule C for home office expenses.
Is there any way a day trader (not using mark-to-market) can get any deduction for a home office, computers, internet service, etc?
Thanks again.
You can use a separate Schedule C to report your day-trading expenses.
From @bwa - Create a separate schedule C (business) where you would report no income, but would deduct margin interest and any other direct costs you may occur. Unlike an investor, these would be business expenses, not itemized deductions.
@bwa 's response is included in the following post, about halfway down the thread: 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?
I'm in the same boat. I can report expenses on Schedule C, but if I don't report any income then TurboTax will not allow home office expense. If I qualify as a day trader, how can I successfully input all my expenses (including home office) on Schedule C without inputting any income since income is already captured on Schedule D? Is there a way to override on Schedule C, or do I just need to do this on the desktop version? Thanks
When you doing home office expenses in Schedule C, you must use actual expenses, do not use the "simple" method. This worked for me. Let me know how it works for you.
Are you using online or desktop version? I tried entering actual home office expenses in online version, but it won’t accept unless you input income which I do not have as it all on 1099-B. How did you get home office expenses to work on TT without inputting income?
but this way will bring out self employment tax. of note, as trader, supposed to be not. thx
good question. I don't have an answer. Any expert on this subject? Thanks
Let's all back up and look at the actual IRS rules. See Topic No. 429 Traders in Securities (Information for Form 1040 for the required reporting based on investor, trader or dealer.
Notice:
If you haven't done the above, you are not a trader, regardless of your transaction numbers. You are a sch D investor.
This is not true. There is nothing is the IRS rules that state you must have made the mark to market election in last years taxes in order to qualify as a trader. Please do not spread misinformation. I’ve spoken with numerous experts on this and the mark to market election is an option for traders to elect, but is not required to qualify for TTS.
This is my understanding too, i.e. there is no direct link between the trader status and mark-to-market election.
But what about the question on the self-employment tax? Thanks
i read some
If you’re a trader who has not made the mark-to-market election, your trading expenses go on Schedule C, the form used to report business income and expenses. But your trading income is capital gain, and has to be reported on Schedule D. This looks very strange indeed to tax professionals who are not familiar with trader filing, but this is how it is done.
dont know how to handle those sch c and D . seems double income
Let me repeat, directly from the IRS website See Topic No. 429 Traders in Securities (Information for Form 1040 for the required reporting based on investor, trader or dealer.
If a trader doesn't make a valid mark-to-market election under section 475(f), then he or she must treat the gains and losses from sales of securities as capital gains and losses and report the sales on Schedule D (Form 1040), Capital Gains and Losses and on Form 8949, Sales and Other Dispositions of Capital Assets as appropriate. When reporting on Schedule D, both the limitations on capital losses and the wash sales rules continue to apply.
Thx. But how report to Sch C on business income if reporting to Sch D if I claimed my trader instead of investor ?
Without the mark to market election, only your expenses will go on schedule C since the income is already reported on sch D. A negative sch C imposes no SE tax. Since 80% of daytraders lose money, without the mark to market election, your losses are still limited to $3,000.
From the IRS, Day trading :
Traders report their business expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). Commissions and other costs of acquiring or disposing of securities aren't deductible but must be used to figure gain or loss upon disposition of the securities. See Topic No. 703, Basis of Assets. Gains and losses from selling securities from being a trader aren't subject to self-employment tax.
In order to file a sch C, you must be a business. From Day trading :
To be engaged in business as a trader in securities, you must meet all of the following conditions:
The following facts and circumstances should be considered in determining if your activity is a securities trading business:
From Small Business and Self-Employed Tax Center
Publication 535, Business Expenses
Publication 334, Tax Guide for Small Business, For Individuals Who Use Schedule C
@spencer00 I hope this clears it up for you. Sch C has no income, only expenses for those without the mark to market election.