Hey guys, a little bit about myself: 1. Started trading in Sept 2018 to Dec 2018. 2. over 1300 trades during this time 3. day traded almost every day 4. did not hold any positions for more than 10 days. 5. Lost about 10k in total (includes commission) After watching Green Trading tax video on youtube, I am pretty sure I qualify for Trader Tax status during this time. I guess my question is, I've never elected to become a Trader Tax Status yet. Can I elect it? Also can I elect to be MTM as well for 2018 or is it too late? Last question, what tax software do you recommend I use to track my trades properly for tax purposes? For some reason, although I lost close to 10k, TD Ameritrade Gainskeeper says I made 18k in gains....how is that possible? I have a feeling its due to a wash rule which is another reason I am thinking of filing for Trader Tax Status.
You should talk to Green Trading tax. You have to apply for it for 2019. They tell your broker. Then you get one 1099 based on MTM at end of year. You can't go back to 2018 if you did not elect this before. Your P/L from Gainskeeper will remove hash sales.
Wash sale rule would apply to you even if you have trader status. Considering your questions refer to taxes, you would be best to consult a qualified Accountant to best advice you on how to get trader status. From what I have read in the internet, a number of those applying for trader status are denied. Get a qualified professional. This is where you need to spend monies!
TTS and MTM are separate things. TTS is based on facts and circumstances... there is no one-size fits all test, or as Green puts it, there is no bright-line test for qualification. Furthermore, TTS status is determined tax-year to tax-year, it is not a permanent status. MTM otoh is a change of accounting method. MTM requires a timely filing with the IRS. In the case of individuals, timely means no later than April 15 (or thereabouts) of the current tax year. Stated clearly, for 2018 taxes, for individuals, April 17, 2018 was that date. Entities have different tax deadlines applicable for timely filing of MTM, and/or also a 75-day window from entity inception to be considered timely. Also, MTM is considered a permanent accounting change... unless revoked or removal is approved by the IRS. In the past, tradelog was recommended by Green. https://www.tradelogsoftware.com/ Seek professional advice, there may be loopholes for timely MTM filing applicable to your situation. HTH
MTM you have to elect and apply with the IRS. TTS needs no election or application. It is simply business expensing. If you feel you qualify and can support your case should the IRS challenge you then you just go ahead and claim business expenses on sch c. There is no form or checkbox for TTS. https://www.irs.gov/taxtopics/tc429
How To Become Eligible For Trader Tax Status Benefits https://www.forbes.com/sites/greats...-for-trader-tax-status-benefits/#5a8903323e35
wow thank you everyone for the responses! I feel like I just received a lot of good quality feedback here. As someone who is just a W2 earner, my taxes are quite simple. I was excited at first because I thought I would qualify to deduct my entire loss of 2018 ($10k) but then I learned that you must elect to be MTM by April 2018. So that ship has sailed which isnt a big deal because I will use schedule C to deduct some business expense. It wont be much but I think it will help. My biggest hurdle now is trying to figure out how to find out my actual cost basis for every trade. Doing 1300 trades within 4 months means a lot of back and forth in the same stock which makes this a complete nightmare. my 1099-B saying that I made 18k in gains when I actually lost 10k. what a mess. Last question. Anyone here recommend a good tax software that can help me figure out the correct wash sale dis allowance? Whats funny is that H&R Block software allows me to import my trades from TD ameritrade but then it shows as a 20k loss when i import everything...which is also wrong. lol. Fun times ahead.