filed tax extension for trader status?

[nkhoi]

now we are getting somewhere, M-T-M need 1 year from the day of declaration to take affect.

 

[galiano]

Quote from z32000:

I just spoke to the IRS and even the lady over the phone was confused!

Basically, I was a daytrader in 2006...but I did not elect for MTM in the beginning of the year. I just want to make sure I elect it and qualify for MTM in 2007.

But how do I know if I qualify for 2007 as a trader with MTM, if 2007 isn't yet over? The documents say to submit your schedule D... Are they saying I need to submit schedule D right now with my extension???

I'm confused.... if someone can correct me on this...

Do I really just need the extension form and the statement with all 3 points on it or do I need something else?

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.

 

[ak15]

http://www.irs.gov/publications/p550/ix01.html

This link contains everything you need to know.

 

[TM1]

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.

 

[ak15]

Quote from z32000:

I just spoke to the IRS and even the lady over the phone was confused!

Basically, I was a daytrader in 2006...but I did not elect for MTM in the beginning of the year. I just want to make sure I elect it and qualify for MTM in 2007.

But how do I know if I qualify for 2007 as a trader with MTM, if 2007 isn't yet over? The documents say to submit your schedule D... Are they saying I need to submit schedule D right now with my extension???

I'm confused.... if someone can correct me on this...

Do I really just need the extension form and the statement with all 3 points on it or do I need something else?

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 “Trader in such Securities.”

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 “John Doe, Securities Trader.”


Respectfully,


John Doe
Social Security Number: xxx-xx-xxxx

Note the dates. Again do your own research .

 

[ak15]

I didn't see TM1's reply which seems to echo what I suggested.

 

[SideShowBob]

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