Self employed day trader in college

V

vincentopulence

Hello everyone,

I started casually trading at the end calendar year 2015 with a Vanguard account; I kept doing that for about half a year until I moved my funds to a TD Ameritrade account. In the year 2016 I was lifeguarding part time, working a mortgage cubicle job full time for 6 months but the majority of my income was through trading. I originally started with about 40k and got my account to around 80k at year’s end of 2016. So I approximately had about 20k in simple income and a little north of 30k in proceeds from trades in calendar year 2016. I filed that year with my normal income being just that, but filed my proceeds as capital gains. In the calendar year 2017 I had no other business activities than day trading, in which I suffered a loss of around 20k.

My concern is that I filed under the wrong definition of income, I visited a CPA and they claimed I couldn’t carry capital losses backward, which I figured made sense for an individual who isn’t an active trader, but I just payed 1000’s in taxes for this exact business activity for calendar year 2016 and this is my soul labor product. After getting the opinion of a few CPA’s, they all gave me different answers and my online sources have basically brought me here to this site. My current stance is this is my soul labor product and I am a definitional active trader with the quantity of my trades I make, these proceeds are not capital gains alike a farmer selling land and making a profit, he created commerce through an uncommon business activity, being other than farming or what have you, trading is an investors core business activity as I’m sure most of you know.

This is now my third year sincerely day trading, I am novice day trader and beyond green with handling my taxes. I don’t think any of my income (from 2016/2017) from this business activity has been filed correctly. I’m in my early 20’s and I’m finance major, and of course none of my tax classes covered anything about this so here I am.

I apologize for the difficultly to read this, I have a decent chunk of change on the table regarding my tax liabilities so your help would be greatly appreciated.

Thanks

Vince
 
vincentopulence said:
I am novice day trader and beyond green with handling my taxes.
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Welcome to ET.

I strongly suspect that the important thing for you to know (as an aspiring trader, as a finance major, and now as a forum-user) is to take tax advice only from someone registered and licenced to give it.

Sorry to be unhelpful (actually it could turn out to be helpful, albeit not quite as you envisaged) but what you really need is a CPA who's familiar with "trading and taxes" in your jurisdiction, not "a range of forum opinion".
 
A couple of thoughts:
1) File for an extension. Easy to do, costless, *and* will get you past this looming April 15 thing (from which rush, you may feel the need to act hasty, and make a mistake that will cost you.

2) Secure someone *informed* to take a look at your '15, '16, and '17 taxes. Doing it after the rush will get them with a fresh brain, and maybe having caught up on all the recent tax law implications that have become operative in the past year. If you can find this person and give them a heads-up?? (And let them thereby have the opportunity to read up on trading, requirements/definitions/etc...) All the better. Go for a package: beforehand April 15, you might expect to pay $200 for 2017. After the 15th, you should expect to get all years done for $250.

3) Get specifics sufficient to advise yourself *next* April -- whether you self-file or not.

4) I know you're really serious about this, and truly put in heart&soul, but remember to cite your trading as your sole taxable activity, as opposed other, more existential taxing categories. :D
 
tommcginnis said:
A couple of thoughts:
1) File for an extension. Easy to do, costless, *and* will get you past this looming April 15 thing (from which rush, you may feel the need to act hasty, and make a mistake that will cost you....
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Do exactly that. File the extension. It will give you time to think.
 
Overnight said:
Do exactly that. File the extension. It will give you time to think.
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maybe not so fast. my recollection is that extensions are not allowed for filing trader status. your first step should be to determine when is the final day to file for trader status. as President Reagan said trust but verify. get moving as 4/15 is approaching.
 
zdreg said:
maybe not so fast. my recollection is that extensions are not allowed for filing trader status. your first step should be to determine when is the final day to file for trader status. as President Reagan said trust but verify. get moving as 4/15 is approaching.
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Hmm. But filing an extension will at least not cost anything? I understand what ye be saying though...If something is owed, the extension will not help if the extension does not apply in this case.
 
Overnight said:
Hmm. But filing an extension will at least not cost anything? I understand what ye be saying though...If something is owed, the extension will not help if the extension does not apply in this case.
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the OP believes that trader status will be of benefit to him. if he wants to avail himself of trader status he needs to knows the deadline for filing trader status. if it is as of april 15th he has to decide his course of action before then. filing for a tax payment extension is a separate issue.
 
zdreg said:
the OP believes that trader status will be of benefit to him. if he wants to avail himself of trader status he needs to knows the deadline for filing trader status. if it is as of april 15th he has to decide his course of action before then. filing for a tax payment extension is a separate issue.
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I seem to recall that you have to file for trader status for the following tax year - you cannot be retroactively apply it to previous tax years. So the OP can file for trader status for the tax year 2018, but the window on 2017 is probably closed. In that case, it won't help the OP with his problem.

My advice to the OP is to take your maximum $3k a year capital loss until you eat up your entire loss. Also either purchase the tax guide at GreenTraderTax or set up a consultation with them so you'll be more prepared in the future.
 
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