Electing Mark-To-Market to avoid future 1099 troubles? Does this make sense to anyone? Any MTM guys also having these 1099B issues?
Yes, individuals can avoid Form 8949 on business trades with a Section 475 MTM election filed with the IRS by April 17,2012. They will then report business securities trades on Form 4797, instead. If you have segregated investments, those still go on Form 8949. If you don't want Section 475 MTM, you can avoid Form 8949 by trading in an entity, since entities currently don't have to file a Form 8949.
It is difficult to believe that the IRS, the brokers, and the tax program people will not have things pretty well figured out by the start of the next tax season. I trade futures so I don't pay much attention to mark-to-market. But if there are tax advantages to you not being mark-to-market it might be worthwhile waiting. As I understand it, once you've made the declaration you are stuck with it for that year and must undeclare, if desired, for future years. Otherwise, it persists without further action. Jack
Hi Mr. Green, If you file taxes with a Section 475 MTM and 4797 Form does your 1099b need to be 100% accurate? Can I just file my taxes using my monthly trading statements and ignore the 1099b altogether? I received a 1099b with erorrs and am waiting for a correction. I daytraded stocks all year and don't have any investments. I'm not sure what to do at this point. Thank you
Yes, you are mostly right on. Just make sure your Form 4797 total proceeds are equal to or greater than the Form 1099-B proceeds. For example in prior years, if you traded stocks and stock options, the 1099-B reported proceeds for stocks only, not stock options. (Options aren't reported in proceeds until 2013). So your Form 4797 would have both stocks and stock options in proceeds and the 1099-B would only have stocks, so the Form 4797 proceeds would be greater. That was enough to satisfy the IRS-computer matching program, so you didn't get an IRS tax notice with questions about it. We hope the IRS computers dial down a big notch for 2011 taxes, and don't send tax notices to taxpayers who have Form 8949 cost-basis reporting mismatches with Form 1099-Bs, since the latter are very botched to date. The problem for 2011 is that many brokers adjusted proceeds in inappropriate ways and that will mess up reconciliations further.
Thank you for the quick reply! I've learned a lot from your posts. Unfortunately, my 1099 proceeds do not match my statements. I'll just use my statements no matter what happens since they are 100% accurate.
Thanks Robert and Jack. Guess Iâm just trying to think of the worst case scenario with these 1099's and maybe mtm might be "insurance" to avoid future hassles. Maybe I should not worry about it and just wait for my amended 1099.
Mr. Green, My statements show a larger amount of proceeds than on my 1099B so I should be safe on this matter. But I am a little concerned about noncovered securities showing on my 1099B. Will the 4797 form clear these noncovered securities to the IRS so I don't have problems in the future? Thank you.
Yes, with a 2012 Section 475 MTM election made by 4/17/12, you won't have Form 8949 to deal with on business trades, since business trades are reported on Form 4797 Part II. Problems with reconciling Form 8949 to botched 1099-Bs may be worse for 2012, afer unresolved problems from 2011 compoundinto 2012. With Section 475 MTM, you are exempt from those rediculous wash sale rules, a major culprit in the form 8949 vs 1099-B disaster.