Trading is (after All) Taxing

[abuguapo 10]

This past April I wouldn't have qualified for Professional Trader Status as defined by the IRS so my filing - when it does occur this coming spring - will be as a regular investor.

 

So now I'm having to consider/understand the implications of the mark-to-market election and navigate the subtleties of the wash sale rule...though I can easily type the terms I have to look up the basic definitions every time I do (a source of some consternation).

 

Here is the thing. I will only be day trading the emini S&P 500 Futures [ES] market (and perhaps some emini Gold Futures [YG])...that's it...exclusively those futures markets...and in some of the research materials I've been able to source (for instance Robert A. Green's "GTT Guide: Accounting for trading gains and losses") they state quite plainly:

 

 

"Guide Highlights Accounting for trading gains and losses is complex and very difficult for most traders...For securities and some currencies traders, figuring out your trade accounting can be a nightmare and cost you too much valuable time and money...Commodities traders have it easy; their brokers send them a Form 1099-B showing "Aggregate Profit or Loss" and they can simply enter that number to their Form 6781."

 

 

 

Can anyone confirm (with confidence) that; in the case that I don't qualify for Professional Trader Status (as defined by the IRS) but solely trade (as my main form of income) Futures markets...specifically the ES (and perhaps the YG) that - come tax time - all I do is submit this 1099-B with the "Aggregate Profit and Loss" section filled in...(paying my 39%+ in tax?)...and I'm done...I'm in the clear...no audit...uncle Sam is happy?

 

In other words do the ES and YG future markets qualify as those future markets that can be processed by way of the 1099-B? (I understand that some single stock future markets don't qualify and so must be processed by way of the mark-to-market election) even if I haven't qualified for Professional Trader Status?

 

Being slightly slow on such topics makes me easy prey for big mistakes when filing in the spring...I just want to make sure I have my ducks in a row.

 

Sorry for the length - any help is much appreciated,

 

gg

[StevenSJC 10]

I'm not a practicing tax attorney during the day or on weekends so take this for what it is worth.....value undertermined....but, I've never had to record my trades on future or forex other than reporting the gain/loss for the year using the Straddle/Futures form on my tax return. No reporting each individual trade or mark to market, etc.... when I was a stock daytrader a long time ago it really stunk but have found for years that the tax reporting on futures and forex is quite easy -- you just need to be sure of course you report it. It will get taxed at both long and short term capital gain.

[SIUYA 11]

could not help it, what a great quote.

"Guide Highlights Accounting for trading gains and losses is complex and very difficult for most traders"

 

Especially the larger banks!

 

Can not comment on the specifics of the US system, however most tax authorities generally seem to adopt the view that what ever system you adopt you stick with it over time, you can prove via invoices/receipts etc the actual numbers and they make sense, and ultimately you have to be comfortable with it, unless you wish to fight them.

Also as this is usually only a once a year issue, i highly recommend recording as detailed notes why you choose to do something. This is extremely handy when reviewing for the next year, and also for explaining if you are audited.

[brownsfan019 17]

My first suggestion would be to contact a professional tax advisor.

 

My second suggestion would be to submit as per what you've read; HOWEVER, be sure to keep all your statements and have the documentation should you be asked for it. You don't have to print each daily statement (although you could) but have a digital version stored and have backups.

 

If you get audited and then have to hire someone you can at least turn over every single statement and let them do their work. As long as you have the documentation, you should be fine.