Please Help- tax issue

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Subject Author Date Please Help- tax issue Marie Bunty 08-19-2009  Re: Please Help- tax issue Alan 08-19-2009  Re: Please Help- tax issue Nick Dixon 08-20-2009  Re: Please Help- tax issue Gene E. Utterback, EA, RF... 09-01-2009  Re: Please Help- tax issue Brew1 09-01-2009  Re: Please Help- tax issue Alan 09-01-2009  Re: Please Help- tax issue Diogenes 08-20-2009
Posted by Marie Bunty on August 19, 2009, 9:53 am Please log in for more thread options Please Help- tax issue ************************** 2008 taxes ************** I have an extension till Oct 15th 2008 to file 2008 taxes. I had a small business till July /Aug of last year. Bec of the economy I had no business after Aug. So I decided to work full time on day trading in stocks. Though I made money initially, I lost more money in the end. Can I write off my Stock trading losses against my other business profits ? and reduce my taxable income ? Pls let me know. Thanks, Marie -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on August 19, 2009, 1:46 pm Please log in for more thread options Marie Bunty wrote: > Please Help- tax issue > ************************** > > 2008 taxes > ************** > > I have an extension till Oct 15th 2008 to file 2008 taxes. > > I had a small business till July /Aug of last year. Bec of the economy > I had no business after Aug. So I decided to work full time on day > trading in stocks. Though I made money initially, I lost more money > in the end. > > Can I write off my Stock trading losses against my other business > profits ? and reduce my taxable income ? > > Pls let me know. > > Thanks, > > Marie > Assuming you are a day-trader, under normal accounting, your gains and losses on your trades are short-term capital gains and losses that are subject to the $3000 capital loss limitation on Schedule D and the wash sale rule for losses is applicable. Your business expenses as a day trader would go on a Schedule C. Under special accounting rules (Mark-to-market), your trading activity becomes ordinary gains and losses and the wash sale rule does not apply. Income and expense goes on Schedule C. You would net your two Schedule Cs to arrive at your net gain or loss subject to self-employment taxes and income taxes. Here comes the big however.... in order to use mark-to-market accounting, you must make an election with the IRS no later than the filing deadline for the year before the year you want the election to go into effect. For tax year 2008, you would have had to make the election no later than 4/15/2008, the deadline for filing 2007 taxes without any extensions.. I assume you did not do that. As such, again assuming that you actually were a day-trader, only your business expenses could be used to offset any other Schedule C net income. Your losses on trades would go on Schedule D with all your other capital asset activity. Please note, that whether you actually were a day-trader and allowed to use Schedule C for your business expenses, rather than Schedule A and its limitations is a matter of all the facts and circumstances of your activity. Day-traders posting losses on Schedule C are subject to a higher than normal rate of audit by the IRS. I highly recommend that you read the fairmark.com "Tax Guide for Investors" section on day trading. See link below. http://www.fairmark.com/traders/intro.htm -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Nick Dixon on August 20, 2009, 8:27 pm Please log in for more thread options > Marie Bunty wrote: >> Please Help- tax issue >> ************************** >> >> 2008 taxes >> ************** >> >> I have an extension till Oct 15th 2008 to file 2008 taxes. >> >> I had a small business till July /Aug of last year. Bec of the economy >> I had no business after Aug. So I decided to work full time on day >> trading in stocks. Though I made money initially, I lost more money >> in the end. >> >> Can I write off my Stock trading losses against my other business >> profits ? and reduce my taxable income ? >> >> Pls let me know. >> >> Thanks, >> >> Marie >> > Assuming you are a day-trader, under normal accounting, your gains and > losses on your trades are short-term capital gains and losses that are > subject to the $3000 capital loss limitation on Schedule D and the wash > sale rule for losses is applicable. Your business expenses as a day trader > would go on a Schedule C. == It is highly unlikely that he qualifies as a day trader. Most day traders go broke, so let's hope he isn't. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Gene E. Utterback, EA, RFC, AB on September 1, 2009, 1:14 pm Please log in for more thread options > Marie Bunty wrote: >> Please Help- tax issue >> ************************** >> >> 2008 taxes >> ************** >> >> I have an extension till Oct 15th 2008 to file 2008 taxes. >> >> I had a small business till July /Aug of last year. Bec of the economy >> I had no business after Aug. So I decided to work full time on day >> trading in stocks. Though I made money initially, I lost more money >> in the end. >> >> Can I write off my Stock trading losses against my other business >> profits ? and reduce my taxable income ? >> >> Pls let me know. >> >> Thanks, >> >> Marie >> > Assuming you are a day-trader, under normal accounting, your gains and > losses on your trades are short-term capital gains and losses that are > subject to the $3000 capital loss limitation on Schedule D and the wash > sale rule for losses is applicable. Your business expenses as a day trader > would go on a Schedule C. > > Under special accounting rules (Mark-to-market), your trading activity > becomes ordinary gains and losses and the wash sale rule does not apply. > Income and expense goes on Schedule C. You would net your two Schedule Cs > to arrive at your net gain or loss subject to self-employment taxes and > income taxes. Here comes the big however.... in order to use > mark-to-market accounting, you must make an election with the IRS no later > than the filing deadline for the year before the year you want the > election to go into effect. For tax year 2008, you would have had to make > the election no later than 4/15/2008, the deadline for filing 2007 taxes > without any extensions.. I assume you did not do that. As such, again > assuming that you actually were a day-trader, only your business expenses > could be used to offset any other Schedule C net income. Your losses on > trades would go on Schedule D with all your other capital asset activity. > > Please note, that whether you actually were a day-trader and allowed to > use Schedule C for your business expenses, rather than Schedule A and its > limitations is a matter of all the facts and circumstances of your > activity. Day-traders posting losses on Schedule C are subject to a higher > than normal rate of audit by the IRS. > > I highly recommend that you read the fairmark.com "Tax Guide for > Investors" section on day trading. See link below. > > http://www.fairmark.com/traders/intro.htm I believe Alan has hit this one right on the head - you need to jump through certain hoops by a certain date to qualify as a "day trader" and since you're posting this question now I'd be surprised if you had made the appropriate election on time. Or course, you could look into getting retroactive approval to be day trader. NOTE - I have never heard of this happening and I have no first hand knowledge of any such thing being approved, but it may be worth a shot. I believe to try this you'd have to request a private letter ruling from the IRS, which will cost you something like $5,000 up front - so considering your financial situation this may not be a viable option for you either. I do have one question for Alan, though - with the disclosure that I do NOT work with day traders so I readily admit that he will be right on this - I thought using mark to market accounting moved the gains to Form 4797, not to Schedule C. Are you sure about this and do you have cite handy (NOTE TOO - I do not expect you to spend any time looking this up, its just that your post hit me as being from someone who deals in this are regularly, so I'm hoping you may have the cite handy). Thanks Gene E. Utterback, EA, RFC, ABA -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Brew1 on September 1, 2009, 5:22 pm Please log in for more thread options On Sep 1, 1:14 pm, "Gene E. Utterback, EA, RFC, ABA" > > > > > > > > Marie Bunty wrote: > >> Please Help- tax issue > >> ************************** > > >> 2008  taxes > >> ************** > > >> I have an extension till Oct 15th 2008 to file 2008 taxes. > > >> I had a small business till July /Aug of last year. Bec of the economy > >> I had no business after Aug. So I decided to work full time on day > >> trading in stocks.  Though I made money initially, I lost more money > >> in the end. > > >> Can I write off my Stock trading losses  against my other business > >> profits ? and reduce my taxable income ? > > >> Pls let me know. > > >> Thanks, > > >> Marie > > > Assuming you are a day-trader, under normal accounting, your gains and > > losses on your trades are short-term capital gains and losses that are > > subject to the $3000 capital loss limitation on Schedule D and the wash > > sale rule for losses is applicable. Your business expenses as a day trader > > would go on a Schedule C. > > > Under special accounting rules (Mark-to-market), your trading activity > > becomes ordinary gains and losses and the wash sale rule does not apply. > > Income and expense goes on Schedule C. You would net your two Schedule Cs > > to arrive at your net gain or loss subject to self-employment taxes and > > income taxes. Here comes the big however.... in order to use > > mark-to-market accounting, you must make an election with the IRS no later > > than the filing deadline for the year before the year you want the > > election to go into effect. For tax year 2008, you would have had to make > > the election no later than 4/15/2008, the deadline for filing 2007 taxes > > without any extensions.. I assume you did not do that. As such, again > > assuming that you actually were a day-trader, only your business expenses > > could be used to offset any other Schedule C net income. Your losses on > > trades would go on Schedule D with all your other capital asset activity. > > > Please note, that whether you actually were a day-trader and allowed to > > use Schedule C for your business expenses, rather than Schedule A and its > > limitations is a matter of all the facts and circumstances of your > > activity. Day-traders posting losses on Schedule C are subject to a higher > > than normal rate of audit by the IRS. > > > I highly recommend that you read the fairmark.com "Tax Guide for > > Investors" section on day trading. See link below. > > >http://www.fairmark.com/traders/intro.htm > > I believe Alan has hit this one right on the head - you need to jump through > certain hoops by a certain date to qualify as a "day trader" and since > you're posting this question now I'd be surprised if you had made the > appropriate election on time. > > Or course, you could look into getting retroactive approval to be day > trader.  NOTE - I have never heard of this happening and I have no first > hand knowledge of any such thing being approved, but it may be worth a shot. > I believe to try this you'd have to request a private letter ruling from the > IRS, which will cost you something like $5,000 up front - so considering > your financial situation this may not be a viable option for you either. > > I do have one question for Alan, though - with the disclosure that I do NOT > work with day traders so I readily admit that he will be right on this - I > thought using mark to market accounting moved the gains to Form 4797, not to > Schedule C.  Are you sure about this and do you have cite handy (NOTE TOO - > I do not expect you to spend any time looking this up, its just that your > post hit me as being from someone who deals in this are regularly, so I'm > hoping you may have the cite handy). > > Thanks > Gene E. Utterback, EA, RFC, ABA > expenses on Schedule C, unlimited losses on the 4797 -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Tax issue - please help April 8, 2008, 6:19 pm urgent ...Tax issue December 4, 2006, 5:57 pm urgent ...pls help.. US tax issue December 12, 2006, 2:35 am How to solve this tax issue? 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