As a self-employed Security Trader (daytrader), I have to report my stock (security) transactions on Schedule D. (I have not elected Mark to Market status for reporting stock transactions). As a "Trader", I am allowed to deduct ordinary business expenses on Schedule C and I addditionally meet all the qualifications for a Home Office deduction. When using Turbo Tax software, (probably any other) If I don't show a profit on Schedule C line 7 (Gross Income), I am unable to deduct the Home Office Deduction in the current year it only allows me to carry it forward to the next year. The program states, "The deduction for a home office is reduced when the home office portion of your business does not show a profit") If I show the profit from the stock transactions on Schedule C and also on Schedule D, I have a double entry for the same income. In addition, if I show a gain on Schedule C, it will effect the Social Security tax due, and it is my understanding that gains from short term stock transactions are not subject to Social Security tax. How, or where, do I report the income from the short term stock transactions, so that I can get the home office deduction I am eligible for and not have this income subject to Social security?? Thanks
I am not a tax expert, but I think I am sure enough about this to be useful to you. Because trader status is unique compared to all other businesses, I suspect that the software is what is at fault. Gains go on sched. D, expenses on C, and no self-employment tax is due. As far as I am aware (having run/owned several businesses) trader status is the only application of this combination of reporting. After several tries I have found that using Turbotax is a pain in the butt. It's just easier in the long run to educate yourself a bit and read the IRS instruction pamphlets and do it yourself. It really isn't hard.
turbo tax automatically calculates se tax and messes you up. You can overide it, but why use it if it only makes your figuring harder?
I have not traded for myself before but will be trading exclusively beginning january. Is it still okay to elect mtm for tax year 2003?Will i have to show a record of my past trading activities to the IRS to be able to elect MtM for the yr 2003? Do i have to pay self employment taxes if i am a MtM trader doing 1000+trades a year? Thanks
Why do you want to elect M2M status? Are you expecting a losing year? And even if you are expecting a losing year, will your spouse have earned income to write your losses off against? (I assume you won't because you are going to be trading exclusively.) I have one word for you... "Tesser"
its because i will have many wash sales and i dont what to get into trouble with them. i hear people telling me not to trade either in december or january... is it correct? if so, do i have to stay out of it both december and january (2 months total?) thanks for ur reply
no need for me to elect MtM?? I dont mind staying out of trading for a month. I can use the extra time for the family. Thanks
It is enough to stay out for 31 days. Staying out means you must not have any position in any of the stocks or options you were trading.
You do have to pay self employment tax, both your own portion as well as what would be your employers portion, a total of 15%. Jessie