Hey day traders Here are some tax strategies for you. Do you trade stocks more often than most people breathe Then you need to understand how Uncle Sam views your habit. Otherwise, youll be confronted with a mountain of paperwork at tax return time. And those profits Well, theyll seem a lot smaller once the Internal Revenue Service has taken its share. Thankfully, there are some strategies that active stock traders like you can use to reduce your tax bill and make preparing your return less of a chore. Heres what you need to know. Also see More tax tips for day traders. Trader vs. investor In the world of taxes, trader and investor each has a special meaning that carries with it some pluses and minuses. Watch Traders Download Full' title='Watch Traders Download Full' />Most individuals even those who trade a few times a week are, by the IRSs definition, investors. But if you spend your days buying and selling stocks like a hedge fund manager, then you are probably a trader, a title that can save you big bucks at tax time. How By allowing you to fully deduct all your investing expenses, such as your home office and computer equipment. So what are you, you ask, a trader or an investor This is one of the fuzziest areas of our fuzzy tax code. Teaches Japanese candlestick analysis stock market investing day, swing, and commodity trading, including charting techniques. Traders-2015-Watch-Online.jpg' alt='Watch Traders Download Full' title='Watch Traders Download Full' />Tuesday 12 September 1930. Mill Road History presentation. Nick Barraclough is a British radio producer, presenter, musician and writer, who is best known for. The question is clear the answer isnt, says an IRS spokesman. The Hot Spot Full Movie Online Free. The only way to define your status is to go by the guidelines laid out in several court cases that have addressed the question. The courts say you are a trader if You spend lots of time trading. Preferably, you dont have a regular full time job. My reading is, you can also be a part time trader, but you had better be buying and selling a handful of stocks just about every day. You have established a regular and continuous pattern of making lots of trades several almost every day the markets are open. Your goal is to profit from short term market swings rather than from long term gains or dividend income. Heres how I think these court cases apply to the real world. Say you spend 1. 0 hours a week trading and total about 2. In my book, youre an investor, not a trader. You arent spending enough time or trading often enough to satisfy the IRS. How about 2. 0 hours a week and 1,0. I think that amount of time and trading gets you there. If you spend 3. 0 hours a week, make 5,0. IRS should agree without a fight. If you choose, you can actually be both a trader and an investor. You must segregate your long term holdings by identifying them as such in your records on the day you buy in. Then they wont taint your trader status. Trading points If youve passed these mushy hurdles and qualify as a trader, heres your reward. According to the tax law, traders are in the business of buying and selling securities. From the IRSs perspective, you are self employed in this activity, meaning you can deduct all your trading related expenses on Schedule C, like any other sole proprietor. This is great, because investors have to account for these expenses on Schedule A, where they can write off only the amount that exceeds 2 of their adjusted gross income. Plus Schedule C write offs reduce your adjusted gross income, which raises the odds that you can fully deduct all your personal exemptions and take advantage of other tax breaks that get phased out at higher levels of adjusted gross income. You can also deduct your margin account interest on Schedule C and probably take an immediate write off for equipment used in your trading activities more than 5. Section 1. 79 write off. Home office deduction Sure, as long as you use the space regularly and exclusively for trading and the deduction doesnt throw you into a net loss position. Finally, you dont have to pay self employment tax on your net profit from trading. All in all, a pretty good deal. If youre a trader, you will still report gains and losses on Form 8. Schedule D, and can still deduct only 3,0. All this makes for a pretty funky looking tax return. Schedule C will have nothing but expenses and no income, while your trading profits we hope will end up on Schedule D. I recommend attaching a statement to your tax return to explain the situation. Mark to market traders If you qualify as a trader, the IRS has a deal for you. Under normal circumstances, when you sell a stock at a loss, you get to write off that amount. But if you buy the same stock within 3. IRS considers it a wash sale and you have a tax accounting nightmare to deal with. Fortunately, you can become whats called a mark to market trader, meaning that you will automatically become exempt from the wash sale rule. Heres how the mark to market rules work. On the last trading day of the year, you pretend to sell all your holdings if any. Even though you still really hold the stocks, you book all the imaginary gains and losses as of that day for tax purposes. You then begin the new year with no unrealized gains or losses, as if you had just bought back all the shares you pretended to sell. Watch Going The Distance Online Mic. Being a mark to market trader has another advantage. Normally, investors can deduct only 3,0. But mark to market traders can deduct an unlimited amount of losses, which is a plus in a really awful market or a really bad year of trading. As a mark to market trader you should report your gains and losses on Part II of IRS Form 4. For more information, see IRS Revenue Procedure 9. Internal Revenue Bulletin 9. Drowning in paper How can you possibly account for hundreds of individual trades on your tax return After all, the IRS wants not only to know your profit or loss from each sale, but a description of the security, purchase date, cost, sales proceeds and sale date. Thats what many new traders are faced with around April 1. Just scrawling in your total long and short term gains wont cut it with the IRS, either. The best way Ive found to handle this mess is to buy financial software and use the feature that allows you to download trading data from online brokers. Then you can transfer all the data into your tax preparation software without breaking a sweat. The rest of us. Truth be told, few people qualify as traders. If youre an investor in the IRSs eyes, you account for your gains and losses on Form 8. Schedule D, just like always. And your expenses now fall into the undesirable category of miscellaneous itemized deductions. You cant claim a home office deduction, not for this anyway, and you must depreciate equipment over several years instead of all at once.