Professional or Non Professional Investor - Data Fees

[ZZ Trader]

Thank you again for all the help, Robert.

 

[def]

Good morning to everyone,

I am writing to see if any of you has encountered a similar problem as mine with Interactive Brokers and what the solution could be.

I have been a Professional Investor until 2 years ago, I was registered with the NFA, but my fund did not launch and so we closed down operations, I signed out of the NFA 2 years ago, I am no more "active", and since that date I have been acting as a Private/Individual Investor, i.e. I am currently not working in any capacity as a manager or trader or anything else.

After reading all the definition of Professional and Individual Investor on the IBKR website, I am 100% that I do match the Individual Investor category.

However, Interactive Broker has decided (based on unknown criteria that they will not reveal to me) that I am a Professional Investor and require me to pay Professional Investor data fees.

As any of you encountered this issue with Interactive Brokers?

What solutions are possible?

ZZ, send a ticket to client services. Explain the above and that will start the process to get you to non-professional. The main issue with the pro fees is that the onus is on the broker to prove you are not professional and your NFA license or other background info must have been flagged.
GFIS is a subsidiary of IBG and client services can assist with your request.

 

[mrrvogl]

Does anyone know if getting "trader status" for tax purposes and moving to Mark to Market accounting automatically make you a professional?

 

[qlai]

Does anyone know if getting "trader status" for tax purposes and moving to Mark to Market accounting automatically make you a professional?

I don’t think so. In below article it says

“Notwithstanding that traders are in a trade or business, they are not subject to self-employment tax owing to the rule that dividends, interest from securities, and gain or loss from the sale of capital assets are not considered self-employment income.”

So if it’s not considered employment income, I assume you are not considered a professional. But I don’t know for sure.

https://www.thetaxadviser.com/issues/2010/feb/sec475mark-to-marketelection.html

 

[tiddlywinks]

Does anyone know if getting "trader status" for tax purposes and moving to Mark to Market accounting automatically make you a professional?

Brokers/FCMs have no idea what kind of accounting changes you are qualified for or have elected for tax purposes,
beyond the titling and/or type of brokerage account.

 

[Robert Morse]

The exchanges in their questionnaire do not ask about MTM accounting.

 

[Robert Morse]

Securities brokers need to know. FCMs do not as all futures are MTM here in the USA.

Brokers/FCMs have no idea what kind of accounting changes you are qualified for or have elected for tax purposes,
beyond the titling and/or type of brokerage account.

 

[tiddlywinks]

securities brokers need to know. FCMs do not as all futures are MTM here in the USA.

Yes, futures are MTM by default. But the rest of your post is nonsense!

Securities brokers issue 1099-B which do not in any way account for IRS tax provisions applicable to and/or elected by the taxpayer. For instance, a 1099-B is not different if the taxpayer has elected MTM accounting or not. What if MTM was filed after account opening? And TTS (Trader Tax Status) doesn't even have a bright-line test at the IRS.

Beyond the KYC questions, and possible credit pull, the titling and type of account is pretty much all you got regarding the tax preparation setup of the taxpayer.

 

[Robert Morse]

Our clients that file for MTM with the IRS, fill out a form called "Mark To Market Election Form." We then send that to Wedbush Securities, the clearing broker for our account, so the end of year 1099 is reported correctly, not based on FIFO with realized P/L only but MTM P/L at year end with no wash sales.

But the rest of your post is nonsense!

 

[tiddlywinks]

Our clients that file for MTM with the IRS, fill out a form called "Mark To Market Election Form." We then send that to Wedbush Securities, the clearing broker for our account, so the end of year 1099 is reported correctly, not based on FIFO with realized P/L only but MTM P/L at year end with no wash sales.

Great! And now back to the question I jumped in on...

Does anyone know if getting "trader status" for tax purposes and moving to Mark to Market accounting automatically make you a professional?

So Robert, does that mean anyone that fills out your internal form named "Mark To Market Election Form" is automatically classified as a "professional" for data fees?