Thanks Robert. You have done a great job on this issue. I don't know how you find time to post here this time of the year, but thanks.
The thought crossed my mind that these rules and the vastly increased compliance burden reflect more than just confusion and poor implementation. The government has never liked the idea of day traders, etc, and neither do the big mutual funds and pension funds. Maybe this is just a stealth campaign to force us out. I know the idea of just restricting active trading to futures and using my IRA to swing trade stocks is beginning to look attractive.
Thanks to my partner Darren Neuschwander CPA who heads up tax preparation and our 15 CPAs, I have time to defend the tax and regulatory interests of traders year round, and to do consultations most of the day.
The IRS did not purposely cause this Form 8949 reporting mess and they still don't even realize it's a mess. Someone may get fired over it, too. The IRS and brokers should issue a recall, but they won't.
I agree with you, many securities traders will migrate to futures to avoid this mess. Odd, Chicago exchanges seem to be the beneficiary again. The current administration is from Chicago, but it's a stretch to connect those dots on this one.
Quote from AAAintheBeltway: Thanks Robert. You have done a great job on this issue.
Given all this trouble with wash sale reporting, I'm thinking of making the Section 475, Mark-to-Market Election with my extension.
What are the main things to worry about, with regard to the IRS, when making the transition to MTM?
I am going to publish a strong blog to repeal wash sales for active traders soon after the tax deadline of 4/17. I already wrote a draft. I'll have a petition at RallyCongress to sign too. We need everyone to get behind it. It's the only good answer to the botched cost-basis reporting saga.
Section 475 MTM is good for securities, not futures. It's a gamble to elect if you have material capital loss carryovers. If you have a large capital loss carryover, and a material trading loss year-to-date 2012, elect section 475 and then form an entity for a do over. So you can generate capital gains in the entity to pass through and use up your capital loss carryover. There are lots of nuances here and I cover some of them in recent webinars, and all of them in chapter 2 on MTM in Green's 2012 Trader Tax Guide.
This upcoming 4/17 election deadline is very key for many traders. Make the right decision as best you can. Run TradeLog for 2011, then turn on section 475 for 2012, and run TradeLog for 2012. That's the info you need to make the right call for the 4/17 election. Making the wrong decisions on section 475 is the biggest tax mistake traders make.
You could be me thinking/saying exactly the same things.
Even before this debacle, everyone should have been considering the advantages of restricting their active/swing trading to IRA's because of the tax and (lack of) accounting advantages (knock on wood).
And were the government not so huge and generally incompetent and inefficient (both largely a function of legacy and difficulty in managing that kind of size), I'd completely agree about this being an implicit strategy to weaken "day traders."
i've been saying this for years. call me a conspiracist or whatever.
for over a decade there was no single rule been implemented that would be in favor of regular joe,who trade\invest in US stocks.
starts from decimalization,then PDT rules,dark pools,internationalization,hft whatever... . this one is just another step to kick us out of the markets..that's how it's feels like. at least to me.
Sorry if this is a silly question, but my head is spinning right now (and my accountant already filed my 2011 taxes without form 8949). If I have trader tax status with the IRS (which I do), was I still required to use form 8949? My accountant told me that since I have trader status it was still okay to use form 4797, which is what we did.