Wash Rule

Does anybody here know the how the wash rule affects non professional traders? In the past I have had 2 different tax firms do my taxes. One of them told me the wash rule did not apply because I am not a professional. The other used it. Now I am doing my own taxes and don’t know for sure if I should use it or not?

Also I started doing my taxes with the account I lost money in. Since this account lost money (I am using the wash rule) Why when I am putting in the trades is my refund getting smaller and smaller? It seems like the winning trades take from my tax refund and the loosing trades don’t do anything.

Any help would sure be appreciated. Like are you a non professional and do you use the wash rule?

Thanks

 

your first tax guy was wrong. just the opposite actually.

 

EOY wash sale violations that carry over defer losses until the next year thereby reducing the refund. Those with Professional Trader status use MTM accounting and don't have to deal with wash sales.

 

I am a bit confused on your terminology. Let me just follow IRS' terminology. They see 2 types of tax filers: Trader, versus Investor. When you say "non professional trader" I take it that you meant Investor?

Because you can be a trader, and have "trader status" - not bound by the wash sale rules eventhough you are employed in a full time job taking a W2. Trading is your side business. The key is: is trading your business? Or just a hobbie? If it is a hobbie, wash sales rule applies. IRS uses 2 tests: whether you have enough trading activities throughout the year, and whether you make money based on short-term price fluctuations instead of long-term capital appreciation and dividends.

 

this is wrong. a trader status trader is still bound by wash sale rules. a trader status with declared mark to market status is not.

 

Thanks for the correction.