As mentioned, the IRS will determine if you qualify for trader status. To elect MTM accounting for 2007, you have to make the election NOW! You would include a statement with all 3 points with your 2006 extension or tax return. Im a trader, not accountant. No recommedation or warranty given.
Something like this will suffice (sign above your name) John Doe SSN 123-45-6789 Attachment to 2006 Form 1040 I hereby elect to use the mark-to-market method of accounting under section 475(f) of the Internal Revenue Code for my trade or business of trading securities. The first year for which the election is effective is the taxable year beginning January 1, 2007. _____________________ John Doe Using trader status (requires no paperwork or declaration) enables you to deduct all expenses associated with trading as business expenses, pc/broadband/cable tv/seminars/books/home office, etc, etc. There is no objective definition of a what constitutes being a trader by the IRS yet. If you make a few trades a week and have no other 'job' or income then I doubt there will be much confusion on their part. If you work for company xyz and also make a few trades a week, I think you'll have a problem. Disclaimer: I'm not an accountant nor do I work for the IRS, just offering what my research has revealed.
You're pretty close. You should send IRS a letter in 2007 if you want to qualify for MtoM in 2007. Below is a form letter that can be helpful to you. Internal Revenue Service Fresno, CA 93888 April 12, 2003 Attachment to 2002 Form 1040 Dear Sir or Madam: In Accordance with IRS regulations, I am filing this statement as follows: 1. I am making an election under section 475(f) of the Internal Revenue Service code to change to the Mark-to-Market accounting method with respect to all securities held by me as a âTrader in such Securities.â 2. The first tax year will be 2003 for which the above election will be effective. 3. The trade or business for which this election is beng made is referred to as âJohn Doe, Securities Trader.â Respectfully, John Doe Social Security Number: xxx-xx-xxxx Note the dates. Again do your own research .
Read over the information on traderstatus.com as well as on Green's website (greentradertax.com) for more info on MTM and trader status. Note that if you miss the deadline you can still form an entity (such as an LLC) and file within the entity. SSB