So basically, if you're trading that same security in an IRA, make sure it's a winner--never sell for a loss! lol.
I know based on what I've read that I do qualify for trader tax status. Not only do I trade regularly through the week but ALL my income comes from trading, so I think it would be hard for the IRS to try to deny me the status. However I don't have the whole "business" set up that Green says is part of the package--office, multiple monitors, etc. I would like to get trader tax status because it would allow me to contribute to my Roth IRA, which is currently dormant. I haven't elected the status yet because it seems a little complicated and daunting to do it on your own (you have to set yourself up as an entity and so on). I'm guessing most who do this have Greentradertax set it up for them?
You can get trader tax status without creating an entity. You won't be able to contribute to an IRA because all your trading income will be unearned income. However, this setup is much simpler to deal with and you don't have to deal with entity reporting and fees.
Forego a casual evening out, and get a copy of Greens current book. Use your 31-day flat position for 2018 projections! Myself, having been on all three sides, no TTS, TTS w/Schedule C, and TTS w/Entity, the later is clearly superior IMO. But each traders situation is different, and It's just silly and inappropriate to make a blanket out of that option. But know, it is not as complicated as it may sound. Multiple monitors and such are a less than trivial concern, with concern being a strong word. Geographic location which determines costs and requirements (initial and ongoing) is much more important, especially at startup. Green is pricey (imo) for setting up an entity. A properly setup entity is a properly setup entity. True regarding TTS without an entity. As for unearned income (with TTS, without an entity), it is possible to convert trading income. Green has a technique using schedule C, and lots of footnotes!!! Been there, done that, it worked for me. Caveat is schedule C is meant for an Uber driver, not a TTS trading business. JMO.
As other people have noted, your situation becomes more complicated if one of those accounts is an IRA. Please tell us if one of the accounts is an IRA. My assumption was that neither account was an IRA.
We've debated this topic before and I do not think you are correct. If you do not have an entity, your trading income can never be anything other than unearned income. You can still report it as business income (assuming you meet trader tax status), but you are not eligible to contribute to an IRA with this income. One perk is that you do not have to pay social security taxes so you can create your own retirement plan if you save appropriately.
spr, The two accounts I have been trading that stock in are individual accounts, Actually, now that you mention it I do have some of the same stock in my Roth IRA. But I am not trading it there and have not taken a loss on it--and my understanding from what's been said so far is there is only a problem if you take a loss and so generate a wash-sale in the IRA. One more thing I just thought of: I only have wash-sales on the stock in ONE account. In The other account I have never sold it fora loss, so no wash sales. I'm wondering if that simplifies things in some way? In other words, would I just need to close positions in the account where there are wash sales for 31 days, and could I continue trading in the other? Or no? One other question that came to mind: since the key is not trading for 31 days, could I also resolve any wash sale tax issues even before year end, at any given time, by not trading the stock for 31 days? For example suppose I close all positions today and don't trade the stock in either account for 31 days. After 31 days, should I then be able to hold the stock in my accounts with no tax issues into 2018 (assuming I don't generate any new wash sales)?
One of the main reasons I wanted to do it at all was to contribute to my IRA, which is really lagging my other accounts because it is under-capitalized. What are for you the main advantages of having trader tax status even without entity? Also, can you just designate one account for trader tax status, and designate some stocks as investments even in a trading account? One of the downsides to converting seems to be you lose long-term tax treatment for your long-term investments. My one account contains mostly long-term investments and even my trading account contains a number stocks I am not trading and plan to hold long-term (though I suppose if need be for tax purposes I could do a transfer and consolidate all the stocks I plan to hold longterm in one account).
Reread comagnum's posts in this thread (plus his link). If it were me, I would purposely avoid trading/buying the same securities in both an IRA and a regular account because if you get it wrong, the penalties are enormous. As for the multiple accounts, you have to view it as having one account in terms of wash sales. You need that 31 day window to reset the wash sales. As long as you don't create new ones, then you are fine. However, make sure you don't trigger a wash sale in early 2018 that can affect your 2017 taxes.
Main benefits of trader tax status (without entity) is that I can write off expenses against my trading profits. Since my expenses are relatively high, this is really beneficial to me. The safest way is to designate some accounts as trading accounts and others as investment accounts. I would not hold an investment position in a trading account. However, I think technically you can do this as long as you document everything thoroughly. To be cautious, I segregate all investments into a different account to make it crystal clear what I am doing. Robert Green has recently blogged about what happens if you hold a long-term investment in an investment account while trying to trade it in a trading account. The moral of the story is that to be safe, you should not be trading the same security in which you have a long-term holding. The IRS can interpret the rules to suit them (and disadvantage you) in these cases.