Anonymous
Anonymous asked in Business & FinanceInvesting · 1 month ago

Day trading stocks, how to file taxes?

Any day trader who can give me advice? 

How do you make tax season simple? 

6 Answers

Relevance
  • kswck2
    Lv 7
    1 month ago

    If you are trading hundreds of times in a given year, you might be best off just paying an accountant. 

  • 1 month ago

    First you need to determine if you should file taxes as a trader or an investor. 

    If you consider trading as your profession you should probably file taxes as a trader. If your primary income comes from a job you should probably file taxes as an investor.

    I recommend you see the introductory pages of the Tax Guide for Traders to determine if you should file as a trader. If you do decide to file as a trader you need to decide if you want to select mark-to-market accounting, covered in the same guide.

    If you file as an investor instead of a trader, you want to use the guide to Capital Gains and Losses instead of the Tax Guide for Traders. As an investor your filing is no more ot less complicated than any other investor, you probably just have a lot more gains and losses to report. As a day trader you probably will have a lot more wash sales to keep track of. One day trader I have known eliminated the need to keep track of wash sales by

    (1) liquidating all his investments every November then

    (2) not doing any trading or holding any positions throughout the month of December. 

    Technically he may have had any number of wash sales during the first 11 months of the year, but since the wash sales had no impact on his taxes for the year he simply ignored them. 

    Since the guides I mentioned are written in simple English by a tax lawyer I suggest you rely on that information instead of answers supplied on this forum. you can find links to those guides at

    https://fairmark.com/investment-taxation/

    I do not know if you know what Section 1256 contracts are but I will mention there are special rules about them you should know if you happen to trade any of them. For information on what they are see

    https://greentradertax.com/trader-tax-center/tax-t...

  • Anonymous
    1 month ago

    It isn't simple.  When I did it, my initial investment was $5,000.  I reinvested the money I made and the IRS did not understand that the income was a reinvestment of the same money I was making.  They thought I was using new money every time, or something like that.  They claimed my income was almost three times what it actually was.  It gets complicated when you have  multiple trades.  Hire an accountant.  The auditing proved that what I actually made was exactly what I claimed, yet they garnisheed my wages as their first step, even before I knew what was going on, and hiring a tax lawyer cost me $2,000 and because of the audit and the work the IRS did claiming I was trying to rip them off, they charged me several thousand dollars.  It was an expensive mess.  When my tax return was accurate in the first place.  Late, but accurate.  First time - don't take a chance.  With multiple trades, hire a "good" CPA.

  • Anonymous
    1 month ago

    You have to put down EVERY SINGLE TRADE.  Chances are you will lose money but you still have to file or the IRS will assume the proceeds are 100% profit.

  • What do you think of the answers? You can sign in to give your opinion on the answer.
  • Anonymous
    1 month ago

    Since it is too late for you to have made an election for tax year 2020, you will file as an investor.  That means you may have to list each sale INDIVIDUALLY on a form 8949.  (Covered sales not subject to change because of wash sales rules can be summarized.)

    If you want to make the mark-to-market election for 2021, you need to review articles on the web about whether or not you would meet the IRS definition of a day-trader.  Having a day job and few transactions won't be good enough.

  • 1 month ago

    i would talk to a tax place about it

Still have questions? Get answers by asking now.