I was looking at the turbo tax web site. I think this year TT understands trader status and mark to market election. They reference MTM in the on line help files, so I'm guessing its in the program this year.
not sure about that Puffy. That MTM has been in there a while. It asked me if I had elected MTM. I figure, I was flat Dec 31 and futures are mtm anyway, so I checked it. I never did file that return, not sure what would have happened if I did. But the most recent stuff I read from Tasser was Turbo Tax did not properly compute the SE tax exemption for traders with trader tax status. If anyone finds out for sure, let us know. To reiterate, we're talking exemption from SE, not mtm conversion to ordinary income.
From the instructions of Schedule D on page 5 under the heading "Specific Instructions" and the sub-heading "Column (d) --- Sales Price": http://www.irs.gov/pub/irs-pdf/i1040sd.pdf "Enter in this column either the gross sales price or the net sales price from the sale. If you sold stocks or bonds and you received a Form 1099-B (or substitute statement) from your broker that shows gross sales price, enter that amount in column (d). But if Form 1099-B (or substitute statement) indicates that gross proceeds minus commissions and option premiums were reported to the IRS, enter that net amount in column (d). If you enter the net amount in column (d), do not include the commissions and option premiums from the sale in column (e)." This implies that it is IB's choice to give us a 1099-B form in one of two options. For the past few years they have opted to send out 1099-Bs that show gross sales price. This is perfectly legitimate, but forces you to shift sale commissions to your cost basis. Note that IB is the only brokerage that I've encountered that does it this way. However, their choice is legitimate and if your total sales do not match IB's 1099-B form, then it is a red flag for the IRS. IB recently sent out a Communique that implies that they will be switching to 1099-B Forms this year that show gross proceeds minus commissions: Carl
It probably won't IF gains from trading activities are entered on Sch C and the result is a net gain. However, traders do NOT report gains/losses on Sch C. Rather, traders' gains/losses are reported on Sch D or, in the case of traders who have made an MTM election, on Form 4797. Either way, Sch C should show expenses related to trading activities, not gains from trading. Thus, the bottom line on Sch C should always be a net loss for traders and no SE tax is due. Am I misapprehending something here?
yes, it is explained in a link somewhere on this site. Even though you show no profit on sched C, there was a glitch in turbo tax which caused SE taxes to be figured in somewhere. I get your point, that is how I see it also. It may have accidently offset other taxes due. There is a way to correct the glitch, but it kind of defeats the purpose of using simplified software.
ok, I think maybe it was, it wouldn't let you bypass the gross receipts part on sched C. And once you entered zero, it then triggered all kinds of other complications. I forget now, If I have time I'll go back and find it.
if he's really not sure whether that is acceptable, he may also be concerned about malpractice liability - I don't know the legalities of it, or how much he may be liable for, but just one lawsuit can be enough to wipe out a lot of returns... fyi - for you guys talking about turbotax - there has been a lot of controversy regarding intuit's including an activation scheme in tt 2002, and restricting use of the software to the initially installed machine (ie, can't reinstall the software to amend a return or view an old return if you get a new computer, or upgrade your current one) - I don't know if they've resolved it yet, but I'd recommend a search on cnet.com if that might apply to you.
that's cause enough not to use IB no matter how good their commission services rates are... Taxes are not something that you want to deter you from trading opportunities, just because they (IB) prepare 1099's that don't jibe with your own P&L figures. Sch K1's usually don't jibe with one's actuall P&L, but you're notified in advance not to expect that to happen. Trading in a retail account, and that still happening is disturbing.