Dennis,
I can't say I'm recommending it but the booklet I used was published by Robert Green. You can find links to his firm by finding a post by him and clicking on his name. I did not find it terribly helpful, especially since the one I bought last December for some reason is for the 1997 tax year (I had to use the wrong business code and I still don't know what 98's code should be- guess I'll have to now file an amended return). However, if you have no experience with trader status you might find some worthwhile information. Basically, it says if you're filing trader status, mark to market, fill out a schedule D, then take your short term profits or losses and, instead of writing them on line 13 of 1040 (I'm doing this from memory, so I hope I'm correct) as capital gains, put it down on Schedule C as business income. Then, put in all your expenses, subtract from any profit and there you go, net income from business. You also have to write a polite note to the IRS telling them that you are electing to use mark to market accounting, that you are a trader in securities and that your business is not subject to Self Employment taxes.
The other thing Mr. Green's booklet offers is a little "test" to determine if you do indeed qualify for trader status. Basically, if almost all your trades lasted less than a few months (less than a few weeks would be even better) and you had less income from other sources, you'd be okay (don't blame me if this is wrong, I'm just parroting what I read).
The most difficult thing for me was figuring out how to file Schedules D AND C without having income show up twice (I used Turbo Tax and it was worthless for trader status). What I ended up doing is filling out Schedule D twice, one with all short term and long term trades. Then I filled it out with just long term gains and interest. I used page one with short and long term, but page two with just long term. This ensured that all the short term trades would not be counted when Turbo Tax figured out taxes on my capital gains. Then, I took my overall short term gains and put that down on my Schedule C. I'm not saying this is right. It's the only way I could figure out how to put my income down so that the correct tax was calculated. I included in my note to the IRS that I'd be more than happy to provide any documentation they required to resolve any issues.
Hope this didn't confuse you too much.
Good luck.
Paul Kaz |
