Is IRS trader status permanent?

[JPB]

I had trader status 15 years ago, then went back to a normal career for the last many years. If I start trading again, part time, does this have any effect on my tax status compared to if I never did have it?
Thanks,
-J

 

[java]

no, you choose how to file every year. Trader status is just a filing choice. All it does is allow you to write off expenses, nothing more and a home office is a red flag. If you travel to seminars about trading that would be a reason to file as trader.

 

[tiddlywinks]

As posted, Trader Tax Status (TTS) is NOT permanent.

The ancillary writing however, incorrect.

no, you choose how to file every year. Trader status is just a filing choice. All it does is allow you to write off expenses, nothing more and a home office is a red flag. If you travel to seminars about trading that would be a reason to file as trader.

TTS eliminates INVESTOR (read individual) tax status. Therefore...

• Expenses are not subject to thresholds and limitations imposed by Miscellaneous deductions of Schedule A.
• Losses are not limited to an annual max of 3000.
• Wash sales rules are not applicable.
• TTS is also necessary for the possibility of generating earned income from capital gains. Earned income is necessary for the possibility of funding retirement vehicles, and provides possibilities for other tax advantages or deductions associated with other personal benefit, benefit-like expenses.

And since when is a home office a red flag? The IRS has even simplified the deduction, making a flat deduction an option. TTS has nothing to do with home office expense. An Uber driver can take an appropriate home office deduction, if all the requirements are met.

Trade On!

 

[stevegee58]

I'm imagining a 90 year old dementia patient in a nursing home with permanent trader status.

 

[java]

As posted, Trader Tax Status (TTS) is NOT permanent.

The ancillary writing however, incorrect.


TTS eliminates INVESTOR (read individual) tax status. Therefore...

• Expenses are not subject to thresholds and limitations imposed by Miscellaneous deductions of Schedule A.
• Losses are not limited to an annual max of 3000.
• Wash sales rules are not applicable.
• TTS is also necessary for the possibility of generating earned income from capital gains. Earned income is necessary for the possibility of funding retirement vehicles, and provides possibilities for other tax advantages or deductions associated with other personal benefit, benefit-like expenses.

And since when is a home office a red flag? The IRS has even simplified the deduction, making a flat deduction an option. TTS has nothing to do with home office expense. An Uber driver can take an appropriate home office deduction, if all the requirements are met.

Trade On!

ok, I stand corrected. Thanks. Now about earned income, as I understand it you need an entity to turn cap gains into earned income but TTS is not necessary or would be redundant. Yes?

 

[Zzzz1]

It also provides other benefits such as carrying over losses. But yes, you are right, the filing declaration and supporting evidence is reviewed each year.

no, you choose how to file every year. Trader status is just a filing choice. All it does is allow you to write off expenses, nothing more and a home office is a red flag. If you travel to seminars about trading that would be a reason to file as trader.

 

[sprstpd]

• Wash sales rules are not applicable.

Only if you elect mark-to-market accounting. Otherwise, wash sales are still applicable. And there are rules on when and how to make that election.

 

[tiddlywinks]

Only if you elect mark-to-market accounting. Otherwise, wash sales are still applicable. And there are rules on when and how to make that election.

True.
TTS does not by itself implement MTM accounting. TTS is required in order for MTM accounting to be elected.

 

[zdreg]

I'm imagining a 90 year old dementia patient in a nursing home with permanent trader status.

there is a lot you don't know about certain posters on ET. I am sure with little effort you can come up with a dementia list.

 

[tiddlywinks]

ok, I stand corrected. Thanks. Now about earned income, as I understand it you need an entity to turn cap gains into earned income but TTS is not necessary or would be redundant. Yes?

Just like any other taxpayer, a trading entity can have TTS status if qualified. However, an entity IS NOT necessary for earned income.

An individual with TTS can use Schedule C with several explanatory and specific footnotes to generate earned income. GreenTraderTax developed the method many years ago with much success. An entity is streamlined and clearer to the IRS.

I will not go into specifics. That is beyond the scope of an ET forum. I used Greens TTS/Schedule C methods successfully, about 15 years ago.

GreenTraderTax.com has many free resources (and for sale products and services)

Robert Green is THE EXPERT on trader taxes.