filed tax extension for trader status?

Discussion in 'Taxes and Accounting' started by z32000, Apr 17, 2007.

  1. z32000

    z32000

    I'm about to go file my tax extension right now...
    but since I'm going to be a trader (day trader) this year, do I have to file for trader status right now?
    I'd like to think I can file for trader status within the time of my extension.
     
  2. Surdo

    Surdo

  3. galiano

    galiano

    In general, the mark-to-market election must be made by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. The election is made by attaching a statement either to your income tax return or to a request for an extension of time to file your return. The statement should include the following information:

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

    Refer to the Form 1040, Schedule D Instructions for further instructions on how to make the mark to market election.


    http://www.irs.gov/taxtopics/tc429.html
     
  4. z32000

    z32000

    sorry, I know this very late...

    I have no idea what schedule D is.. nor do I really want to go through all my trade paper work right now... which is why I want to file an extension...


    do I basically just send the extension form along with a piece of paper typed almost the exact word for word of what you wrote in your response...


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


    This is very confusing! I can only blame nobody but myself.
    If someone can tell me EXACTLY what I need, that would be helpful. Thanks in advance
     
  5. ak15

    ak15

    You can file for trader status within the time period allowed. However, it is for the IRS to decide if you qualify for trader status based on several criteria. For example - Number of trades per year, if trading is your source of livelihood etc.
    However, trader status by itself is not beneficial unless you also elect MtoM accounting.
     
  6. nkhoi

    nkhoi Moderator

    trader status is diff from market maker status. there is bunch of restriction on MM but if you trade frequently then your status should/could be trader status. You just call yourself trader, there is no declaration paper to fill, death line to meet.
     
  7. galiano

    galiano

    What is Market Maker status? Do you mean Mark-to-Market accounting?
     
  8. z32000

    z32000

    I just spoke to the IRS and even the lady over the phone was confused!

    Basically, I was a daytrader in 2006...but I did not elect for MTM in the beginning of the year. I just want to make sure I elect it and qualify for MTM in 2007.

    But how do I know if I qualify for 2007 as a trader with MTM, if 2007 isn't yet over? The documents say to submit your schedule D... Are they saying I need to submit schedule D right now with my extension???

    I'm confused.... if someone can correct me on this...

    Do I really just need the extension form and the statement with all 3 points on it or do I need something else?
     
  9. z32000

    z32000

    mark to market...sorry
     
  10. ak15

    ak15


    Trader status by itself offers no benefits. It does not reduce your taxes by itself. By electing MtoM your gains and losses are treated as ordinary gains and losses and taxed as such. Otherwise, you will be subject to capital gains and losses and the accompanying limitations.
     
    #10     Apr 17, 2007