Technically you can't make the election for 2023 since it had to be done with the 2022 return by the initial due date or with a timely filed extension for that return which was 4/18/2023.
if you qualify, your next opportunity will be for 2024 by filing the election with a timely filed 2023 return or extension - 4/15/2024
Here's more to see if you even qualify.
Traders
Special rules apply if you're a trader in securities, in the business of buying and selling securities for your own account. The law considers this to be a business, even though a trader doesn't maintain an inventory and doesn't have customers. To be engaged in business as a trader in securities, you must meet all of the following conditions:
You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation;
Your activity must be substantial; and
You must carry on the activity with continuity and regularity.
The following facts and circumstances should be considered in determining if your activity is a securities trading business:
Typical holding periods for securities bought and sold;
The frequency and dollar amount of your trades during the year;
The extent to which you pursue the activity to produce income for a livelihood; and
The amount of time you devote to the activity.
If the nature of your trading activities doesn't qualify as a business, you're considered an investor and not a trader. It doesn't matter whether you call yourself a trader or a day trader, you're an investor. A taxpayer may be a trader in some securities and may hold other securities for investment. The special rules for traders don't apply to those securities held for investment. A trader must keep detailed records to distinguish the securities held for investment from the securities in the trading business. The securities held for investment must be identified as such in the trader's records on the day he or she acquires them (for example, by holding them in a separate brokerage account).
Traders report their business expenses on Schedule C (Form 1040 or 1040-SR), 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.
The Mark-to-Market Election (optional, generally used to avoid the issue of wash sales)
Traders can choose to use the mark-to-market rules, investors can't. 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 8949 as appropriate. When reporting on Schedule D, both the limitations on capital losses and the wash sales rules continue to apply. However, if a trader makes a timely mark-to-market election, then he or she can treat the gains and losses from sales of securities as ordinary gains and losses (except for securities held for investment - see above) that must be reported on Part II of Form 4797, Sales of Business Property. Neither the limitations on capital losses nor the wash sale rules apply to traders using the mark-to-market method of accounting.
You can make the election by attaching a statement either to your timely filed 2023 income tax return if filed without an extension or with a timely filed request for an extension of time to file your return. The statement should include the following information:
That you're making an election under section 475(f);
The first tax year for which the election is effective (that is, the tax year for which a timely election is being made); and
The trade or business for which you're making the election.
Refer to the Instructions for Schedule D (Form 1040 or 1040-SR), Capital Gains and Losses for more information on how to make the mark-to-market election. It's important to note that in general, late section 475(f) elections aren't allowed.
After making the election to change to the mark-to-market method of accounting, you must change your method of accounting for securities under Revenue Procedure 2022-14, Section 24.01. In addition to making the election, you'll also be required to file a Form 3115, Application for Change in Accounting Method. Publication 550 describes the procedures for making an election under the section called "Special Rules for Traders in Securities." Non-filing of the Form 3115 mentioned above won't invalidate a timely and valid election.
If you've made a valid election under section 475(f), the only way to stop using mark-to-market accounting for securities is to file an automatic request for revocation under Revenue Procedure 2022-43, Section 24.02. Under that revenue procedure, the request for revocation must be filed by the original due date of the return (without regard to extensions) for the taxable year preceding the year of change (the year of change is the first taxable year the revocation is to be effective). This revocation notification statement must be attached to either that return or if applicable, to a request for extension of time to file that return. Late revocations won't generally be allowed except in unusual and compelling circumstances.
A trader is not required to make the 475(f) election.
here's more
Currently, there is no statutory law with objective tests for eligibility. However, subjective case law applies a two-part test. The following are some of the golden rules that can help you qualify for trader tax status:
- Volume: The 2015 tax court case Poppe vs. Commission is a helpful reference. Poppe made 720 total trades per year or 60 per month. We recommend an average of four transactions per day, four days per week, 16 trades per week, 60 a month, and 720 per year on an annualized basis. Count each open and closing transaction separately, not round-trip. Scaling in and out counts, too.
- Frequency: Execute trades on nearly four weekly days, around a 75% frequency rate.
- Holding period: In the Endicott Court, the IRS said the average holding period must be 31 days or less. That’s a bright-line test.
- Hours: Spends more than four hours daily, almost every market day, working on their trading business—all-time counts. Avoid sporadic lapses: A trader has few to no intermittent stoppages in the trading business during the year. Vacations are okay.
- Intention: Has the intention to run a business and make a living. It doesn’t have to be your primary living.
- Operations: Has significant business equipment, education, business services, and a home office.
- Account size: Securities traders need to have $25,000 on deposit with a U.S.-based broker to achieve “pattern day trader” (PDT) status. We want to see more than $15,000 for the minimum account size.
to avoid potentially serious tax issues by making an invalid election you should consult with a tax professional.
