Day Trading taxes

[jinlong0720]

waiting for the answers... lol, I have the same situation... and don't know what to do now. I e-filed my taxes already as well, and want prepare my next year's stock taxes return as MTM method, all in all, is that just mail a paper world printed copy of statement states those 3  sentences?  or there is more need to be mailed, thanks

[AmyC]

Yes, you can file the 4868 after the return for the ability to file the 475. I would maybe change stock options to stock options/ securities for point 3. Securities is different than futures and commodities. That is where the difference to the IRS can lay.

Pub 550 states:

How To Make the Mark-to-Market Election

To make the mark-to-market election for 2021, you must have filed an election statement no later than the due date for your 2020 return (without regard to extensions). The statement must be attached to that return or with a properly filed request for extension of time to file that 2020 return (Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return). The statement must have included the following information.

• That you are making an election under section 475(f)(1) or (f)(2) of the Internal Revenue Code.

• The first tax year for which the election is effective.

• The trade or business for which you are making the election.

Next year, when you file your first securities business return, you must elect an accounting period. On the Form 3115 filed for the year of change, a taxpayer should indicate that the taxpayer has filed the statement in compliance with section 5.03(1) of Rev. Proc. 99-17. See Form 3115 instructions page 4 right hand side for mark to market. You can file it with your return next year.

@Jagan

@jinlong0720

[achinta1979]

Hello,

I have already filed my 2020 Tax return Electronically using Turbo tax and my return got accepted and Refunded. I forgot to elect  475(f) /Attach for Mark to Market (Election) with my 2020 taxes. How can i send my Mark to Mark Election statement once the Return has been approved and Refunded. Need your advice asap.

Thanks

Aneela 

[achinta1979]

How to  make 475(f) - MTM election for 2021 once my 2020 return has been accepted and Refunded?

[AmyC]

@achinta1979  If your return is already filed, you will need to do a work around and file an extension request, form 4868, in order to file the section 475(f) election. It's a bit illogical to file an extension after the return, but, if you already filed, that is your only option.

Pub 550 states:

How To Make the Mark-to-Market Election

To make the mark-to-market election for 2021, you must have filed an election statement no later than the due date for your 2020 return (without regard to extensions). The statement must be attached to that return or with a properly filed request for extension of time to file that 2020 return (Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return). The statement must have included the following information.

• That you are making an election under section 475(f)(1) or (f)(2) of the Internal Revenue Code.
• The first tax year for which the election is effective.
• The trade or business for which you are making the election.

Next year, when you file your first securities business return, you must elect an accounting period. On the Form 3115 filed for the year of change, a taxpayer should indicate that the taxpayer has filed the statement in compliance with section 5.03(1) of Rev. Proc. 99-17. See Form 3115 instructions page 4 right hand side for mark to market. You can file it with your return next year.

[jinlong0720]

you helped me right on time, thanks, I just mailed out all my tax return papers with cover letter and section 475f election, but no Form 4868, I was wondering how is this gonna work without properly notice IRS, while, this 4868 makes sense. thanks. Now I'm recalling my mail.... lol 

[AmyC]

@jinlong0720 Filing the section 475f with the return is correct, no 4868 needed. Taxes done, election made, have a good night!

[jinlong0720]

I have e-filed my tax return already, same situation as above. ( e-filed, got tax return to my checking account ). That’s why I need some kind of form to let IRS know that there is a statement attached. 

You just said, under this situation, file an extension with attached section 475f election is the only way to let irs know. 

Just one more thing, print out tax return means all the paperwork? Or just 2 pages of 1040, Or 1040 with all supporting forms (schedule c, d, etc). 

thanks so much. There really isn’t any detailed information regarding about this process on the whole internet. 

[fanfare]

the process is detailed right here in this thread and on many other related threads on this forum.

The quotes are straight from the IRS website.

I don't know what more you could want.

You have until May 17th this year to make the MTM election for 2021 by attaching it to Form 4868, or your mailed-in paper tax return.

[BruceEdwardsEA]

I agree, and I suspect anyone experiencing this much trouble figuring out the election process is going to run into significant issues when it comes time to filing the actual return - with all it’s nuances- as a “trader”.  Furthermore, for the vast majority of so called “traders” (including myself) I think the reward probably does not justify the time, effort, and inherent risks involved in future dealings with the IRS....

[ColeenD3]

@ BruceEdwardsEA

Yes, to me it seems an incredibly difficult process and requires quite a bit of tax know-how. From what I have seen, day trading seems to pop up in a year like this one, where there are no jobs to be had. By the time all the hoops are jumped through and the proper forms filed, it is likely the person has found a job and no longer has the time to make this his profession. This is why my tendency has been to let them know about the 475f election made in the prior year that the fact that you have to change your accounting method via Form 3115.

I have not actually seen a day trader return, since no one has ever stuck with the process.

[js717]

Hi fanfare,

How do I file using "Day Trader" as a business so I can deduct some expenses? Do I have to prove somehow I met the creteria as "Day Trading"?  I have Home&Business desktop version. 

I'm not that worried about washsales or $3K limit annual loss, so don't necessarily want to do M2M.

Thank you!

Johnny

[tagteam]

You do not file for Trader Status (aka day trader).

There is no election to be made, as there is for M2M, and whether or not you qualify is based upon various facts and circumstances.

See https://www.irs.gov/taxtopics/tc429

[Bella50]

Thanks for the post.

I hear that there are different forms for different types of securities traded.

Question 1Can you please clarify the forms required for the following: 

-ETF trade loss/gain - form 4797 part II

-individual stocks - form 4797 part II

-Options trade loss/gain - form 6781

Question 2 What is the form 4787 used for?

thank you!

[fanfare]

If you are a Professional Trader (MTM)

Your form 4797 has one line saying "Trader - see attached", with totals.

Then you itemize the detail for all the thousands of trades you made.

You will have to file on paper since form 4797 doesn't allow an e-File attachment.