Advice on how to file?

[algofy]

Just make it super easy on yourself and take December off. If you don't trade for the entire month of December, it is IMPOSSIBLE to have a wash sale which carries into the next tax year. All the other wash sales during the year are just a bunch of superficial bookkeeping that means absolutely nothing on your annual tax filing.

You'd save yourself a whole mess of issues if you'd just stick to trading Section 1252 contracts. Get the 60/40 tax break, put the one-liner on your tax form, no write-offs, no biz associated with your trading...you're done.

Best advice.

 

[Cuddles]

Just make it super easy on yourself and take December off. If you don't trade for the entire month of December, it is IMPOSSIBLE to have a wash sale which carries into the next tax year. All the other wash sales during the year are just a bunch of superficial bookkeeping that means absolutely nothing on your annual tax filing.

You'd save yourself a whole mess of issues if you'd just stick to trading Section 1252 contracts. Get the 60/40 tax break, put the one-liner on your tax form, no write-offs, no biz associated with your trading...you're done.

Can that apply if I take Jan off? Also, been looking at 1256 as mentioned but IB requires 50k for futures and am not ready to dabble into options yet. I think currency falls in that umbrella but it's not as clear cut I think?

 

[Pekelo]

Just make it super easy on yourself and take December off.

It might be good advice but you wrote it in the first days of January...

Also, he could trade just not buy back what sold in mid-December...

 

[Sig]

It might be good advice but you wrote it in the first days of January...

Also, he could trade just not buy back what sold in mid-December...

That's what you get when you ask for tax advice the last day of December!

 

[sprstpd]

Can that apply if I take Jan off?

Yes, take 30 days off in January and your wash sale problem will disappear (you can also trade different securities during those 30 days that are not "substantially identical" to the ones you have been trading).

 

[Cuddles]

Yes, take 30 days off in January and your wash sale problem will disappear (you can also trade different securities during those 30 days that are not "substantially identical" to the ones you have been trading).

Will do, thanks. I still have to report all wash sales is my understanding? Just won't be penalized when submitting losses?

 

[sprstpd]

Will do, thanks. I still have to report all wash sales is my understanding? Just won't be penalized when submitting losses?

Well, I would report what your broker reports to you just so that it matches. They will most likely have lots of intermediate wash sales transactions, but you won't be prohibited from taking the "final" loss if you don't trade in January.

 

[Steve Alexander]

I'm an ordinary guy w/a day job. I've been reading up on short term & long term cap. gains and wash sale rules and I'm a little scared come tax time.

My trade strategy is long term but I do scalp from time to time and exit long positions by stop loss sales quite often (many times w/o going back in). I'd say I do less than 200 trades a month.

Should I look into forming an llc or s-corp? If so, why? Should I look into mark-to-market trade rules (how will these help me? Is there a process to qualify?)

Any advice welcome.

PS:I thought cap. gains were cap gains, initially didn't know there were long term rules.

Form a C-corp, not an S-corp or LLC. Open a brokerage account for the corp. The brokerage will provide you with a 1099 at the end of the year. Easy-peasy.

 

[comagnum]

If your filing as a C corp for the only purpose of getting a lower tax rate on their stock profits when trading/investing is not a full time job that it could appear to the IRS calls "abusive tax shelter'. When in doubt.. doubt or better yet consult a tax professional in your state.

Drawbacks of Using C Corporation Format

• The potential for "double taxation." The chief drawback of a C corporation is the so-called "double taxation" potential. "Profits are first taxed to the corporation," Weltman says. "Then, when they are distributed to shareholders in the form of dividends, they are taxed again; the corporation cannot deduct dividend distributions." However, the threat of a double tax can sometimes be mitigated for following certain strategies.
• The requirement to file more paperwork. Corporations are required to hold formal board and shareholder meetings and keep accurate minutes of these meetings. In addition, there are a series of tax forms that may need to be filed with federal, state, and even local officials, including corporate taxes (IRS Form 1120), taxes on salaries and other employee compensation (W-2s), and profit distribution to shareholders (Form 1099-DIV). "A C corporation complicates your life," Ennico says. "Most entrepreneurs I work with want to spend their time making or selling their products. They don't want to stay up until 3 a.m. doing paperwork."
• Corporations must have their own financial accounts and file the names of all officers with the state. Like corporations, a board of directors is established and it is this board that makes managerial decisions.
  
  A C corporation is owned by shareholders, who must elect a board of directors that make business decisions and oversee policies. In most cases, a C corporation is required to report its financial operations to the state attorney general.