Job Title on 1040?

[seasideheights]

The bottom of the 1040 tax form asks for your job title (right above where you sign the form).

If you only trade in a year for yourself (non-professional using online brokers), what do you put as your job title?

 

[traderstatus]

Quote from seasideheights:The bottom of the 1040 tax form asks for your job title (right above where you sign the form).

Actually it asks your occupation, not your title. Your occupation might probably be the same as listed on your Schedule C. If you do not use a Schedile C, then your occupation mgiht be that of "Investor"

 

[amg]

Be careful with the distinction of "trader" vs. "investor". If you you choose to claim your income from trading during that year as business income and use trading expenses as business deductions, then your occupation is a "trader".

HOWEVER, if you *also* had a "regular" 8-5 type job while you were trading, claiming "Trader Status" could very well be indefensable if you were to be audited. In that case (an 8-5 job), your occupation would be whatever that job was and your trading income/expenses would be treated as investments, not business items.

To distinguish, an "investor" would not be able to claim expenses as a business deductions and would additonally pay capital gains taxes based on his gains as taxable investment income, not as business income. This would be the case even though income from his investments might exceed the income from his "job".

This subject will no doubt be a common one as the end of the year approaches. If you don't already have an accountant, do some self-educating with a google search on <a href="http://www.google.com/search?num=100&hl=en&lr=&newwindow=1&rls=com.microsoft%3Aen-us%3AIE-SearchBox&q=trader+status+income+taxes&btnG=Search">trader status</a> for a start.

amg

 

[ElectricSavant]

That is a very important classification you are answering and it is important that you get it right.

The IRS has parameters and averages that you can fit into for your occupation...you really do not want to be "outside" those parameters/averages.

Turbo Tax does an excellent job of defining this for you and analysing your return.

Micahel B.

 

[whitster]

two other factors.

1) if you are going to claim professional trader status for a given year, you must declare it by april 15th.

so, if you were to declare your trading gains as income as a pro trader for 2006, you already had to declare it by april 15 of this year

2) *if* you claim pro trader status, you can elect mark to market accounting. it is not automatic, but you need to claim pro trader status to be able to use mark to market iirc

i do know people who hold other jobs who have declared professional trader status

some hints

1) an office that is used solely, or almost exclusively for trading, should be set up
2) keep a detailed trading log
3) have a business plan, a trading manual, etc.
4) treat it like a business. period.

imo, ALL traders should treat trading like a business. but if u want the IRS to accept you as a business, this goes double.

also keep in mind that 99% of accountants know jacksquat about daytrading and these issues.

note that none of what i have said here should be construed as legal advice. i am not a CPA, i am not a tax attorney, i am not an attorney... period.

thank God

 

[Surdo]

Quote from ElectricSavant:

Turbo Tax does an excellent job of defining this for you and analysing your return.

Micahel B. [/B]

Does Turbo Tax go to bat for you if/when you ever get audited?

I understand if you have a plain vanilla return and no "funky" deductions, but do yourself a favor hire a good CPA for a few bucks, guess what, his fee's are deductible next year!

surdo

 

[ElectricSavant]

Actually yes they do...for calculation errors...They pay it, if its their software error...

Quote from Surdo:

Does Turbo Tax go to bat for you if/when you ever get audited?

I understand if you have a plain vanilla return and no "funky" deductions, but do yourself a favor hire a good CPA for a few bucks, guess what, his fee's are deductible next year!

surdo

 

[traderstatus]

Quote from ElectricSavant:Actually yes they do...for calculation errors...They pay it, if its their software error...

Actually they seldom, if ever, pay. What's the chance that 2+2=17 happening?

Most errors are user input errors or user interpretation errors.

When and if a penalty IS assessed for an error.. The taxpayer must pay the tax and the software company "would be liable" for the penalty.

But in practical terms if the software was the exclusive cause of the error, the IRS often will waive the penalties in full under the allowance granted by Congress for "penalty abatement due to reasonable cause."

An other issue is interest charged on the underpayment. That can go two ways. #1 the taxpayer had the improper use of the money and so he should pay the interest regardless of who's at fault. #2 the case can be made that the taxpayer had no use for the underpaid money and it just sat in a non-interest bearing account therefore the software company should pay.

Here come the lawyers to settle that one!