Hey Jason, I qualify for TTS and am elected to file for MTM this year. - Time spent more than 4 hours per day in weekdays, including audible, reading, lectures, trading view (2+ hours per day on the weekends) - Activity is substantial (transactions reach 50+ million) - 1000+ Trades per year - Intent is to earn a living - Frequency: Average trade is held for less than 2 hours - I've traded on 90% of the trading days during the last three years My question is: I trade and spend more than 4 hours per day (and close to 2/day hours on weekends) on trading), and I have traded 90% of the trading days in the past three years. I do have a job. Is that considered a part-time trader, and does the IRS take points off of being only a part-time trader based on my activities mentioned above? My understanding is that In the grand scheme of things, the IRS looks at your intent and all the criteria mentioned as a whole. For which I qualify with flying colors!!)
Thanks Jason, you are amazing with how much work you have put into your channel!!!!! Massive 100% thumbs up!!!!! You have inspired me to do better on my personal channel.
The hours per day requirement is silly, meeting the number of trades requirement can often be done in far less time, especially if you’re writing software to conduct your trades. Once it works reliably no reason for you to do much at all other than monitor things, which sure as heck doesn’t take 4+ hours a day to do.
learned a lot from your video, Jason. thank you for that. may i ask a question - can I have a LLC with my wife where I'm the primary active day trader and continue to do her job and volunteering activities unrelated to trading?
Thanks much Jason. In regards to attaching form B to schedule D; I will have about 40 pages of trades so I will need to print out those 40 pages and attach to the schedule D?
Great information. How do you know when you’ve been approved for TTS.? I want to file this year so I’ll be approved for next years taxes. If that makes sense.
The IRS does not formally approve or deny your TTS because there is no application process. If a taxpayer believes they qualify, they report their income and expenses on their tax return consistent with the treatment. If, in the future, the IRS decides to audit you, at that point they will ask for sufficient proof that you qualify for TTS.
You can do the TTS without the 475 election right? Like if I am profitable and don’t need to worry about the 3,000 losses, there is no reason to make that election right? I am trading spreads and options so wash sale isn’t applicable.
Does anybody know what you do if you are a MTM trader, but now you're filing taxes on a year in which you no longer qualify for Trader Tax Status? I am having a really difficult time figuring out what the protocol is. You can permanently revert back with a form 3115, but I didn't file this with my extension. Some sources are saying that your MTM method of accounting is "suspended" and you therefore just file as any other person would, as an investor, not a trader. If anybody could provide some insight here I would GREATLY appreciate it!
Jason what An amazing break down thank you for your video! I’ve been researching this, correct me if I’m wrong. If I want to elect for MTM in 2024, i have to fill out a 3115 when I do my file my taxes in 2023?
Do you have any idea if you must have an LLC to deduct expenses? My account says that the TTS only applies to the wash sale capital loss rules but does not allow you to deduct expenses unless you are registered as a business but that doesn't seem correct from info I have been reading. thank you
10:45. Question: So if you are TTS (Assume you are TTS already) but not MTM you still put trading income on Schedule D (NOT C). So if you have long term capital gains you still have long term capital gains benefits????. I am thinking of gains or loses from 1256 contracts tradings like SPX, /es,/NQ here 60% is long term and 40% short term by law.
Hey Jason--Thanks for posting. I wonder whether the open positions I help at the end of 2023 should dissuade me from claiming trader tax status with a mark-to-market election beginning with tax year 2024? In other words, I will have to file a form 3115 with a 481(f) adjustment--but will the adjustment be a disaster, costing me more than the worth of the TTS and mark-to-market election? How do I analyze this? can I hire you to assist and assess this issue? Thanks! Doug.
Good video! But I have to say it is probable you will me audited when the income is 0 on schedule c even though u r trader. Usually I would not suggest clients do that
Yes! That's exactly why I mentioned during the video that I do not recommend this for traders, as they should use either an S corp or partnership structure to avoid Schedule C. However, if you don't go down that path, these are the reporting instructions per the IRS.
So trader bros that trade 4 days a week can deduct the cost of an investment letter subscription. (which they won't be reading because they are trading 4 days a week) And the investor that makes long term trading decision... cannot deduct the cost of an investment letter subscription.. even though he'd be the one studying it.
Essentially yes. The IRS is less concerned about how much you use the item that created an expense (e.g., the newsletter), and more concerned about the amount of time and level of activity spent on generating the revenue. The long-term buy and hold investors generally do not qualify for TTS because they aren't executing enough buy/sell trades during the year.
@@JasonDKnott and so the IRS encourages speculative noise. Meanwhile there is no record of the up-to-date share count of a company. And then they wonder why we get these bubbles and pops and crashes. I guess people benefit from those bubbles and so the system will continue that way.
Claiming TTS on a tax return is a substantial tax position which can result in red flags and potential audits. You want to make sure you actually qualify for TTS, which is why we always recommend working with a CPA or tax attorney on your taxes.
As far as I know TTS is not an election, not like 475 MTM is. There is no form or checkbox. You basically assert it by taking business expense deductions and using a relevant occupational code.
Hello is this the same filing for forex trading? In particular, would income/loss from forex be considered capital gain/loss on schedule C or could we characterize it as self employed income? Thank you for providing this educational video
What if you have a lot of both short-term trades and long-term holds? Can you segregate the short-term trades and long-term investments and treat them differently? I am kind of in that position. I have lots of both. I had over 1300 trades last year. Definitely met the other requirements, including spending as much time as I would on regular employment, investing in professional software, screeners, L2 data, etc. The only thing that worries me is the holding period. Mine is a mix. I have some that are three months, some a year or more. But the bulk is a month or less, I think. I'm not sure why one wouldn't be considered a trader if they have enough activity and short-term activity to qualify merely because they have other kids of trades that may be longer-term.
One other follow up question that I haven't seen answered anywhere else: If I don't qualify for TTS, are there any expenses that are nonetheless deductible? For example, it's my understanding I can still deduct margin interest. But what about investment in software, equipment, etc? I know I can't claim home office expenses (e.g. prorated rent/utilities) unless I qualify for TTS. But what expenses can I claim even without TTS? So complicated! Your video is very helpful, so thank you.
And I'm sorry: ONE more question. haha Turbo Tax advised me that I MUST elect for Section 475 Mark to Market status to file as a trader. But from what I can discern elsewhere, that's not true. Can you confirm that I can file as TTS status without marking the Mark to Market election?
Tax advisors recommend minimum of 1000 trades per year or 83 trades per month ( is this means if i open a position and close same day or next day , is it consider as 1 trade or 2 trades? if its consider as 2 trade then we only need to do 2 roundtrips (buy and sell) a day assuming 22 trading days a month.
@@JasonDKnott Does options contracts count as extra trades? If I sell credit spreads and sell 100 and buy 100 options contract? is that 200 trades in a month?
I have been a 475 MTM trader for 5 years and this is the first year I will have losses. As a 475 MTM trader can you carry forward those ordinary losses ? Example, My trading losses this year will be $50k and I am not employed this year and have zero income. I expect to go back to work next year and have income taxes of approx $30k so is there a way to carry forward those taxes losses to offset my expected income taxes for next year?. What form would I use if thats possible... thanks I love your videos!
Hey Jason, I qualify for TTS and am elected to file for MTM this year.
- Time spent more than 4 hours per day in weekdays, including audible, reading, lectures, trading view (2+ hours per day on the weekends)
- Activity is substantial (transactions reach 50+ million)
- 1000+ Trades per year
- Intent is to earn a living
- Frequency: Average trade is held for less than 2 hours
- I've traded on 90% of the trading days during the last three years
My question is: I trade and spend more than 4 hours per day (and close to 2/day hours on weekends) on trading), and I have traded 90% of the trading days in the past three years.
I do have a job. Is that considered a part-time trader, and does the IRS take points off of being only a part-time trader based on my activities mentioned above?
My understanding is that In the grand scheme of things, the IRS looks at your intent and all the criteria mentioned as a whole. For which I qualify with flying colors!!)
Thanks Jason, you are amazing with how much work you have put into your channel!!!!! Massive 100% thumbs up!!!!! You have inspired me to do better on my personal channel.
Thank you, Rick. Glad to hear the videos are helpful!
The hours per day requirement is silly, meeting the number of trades requirement can often be done in far less time, especially if you’re writing software to conduct your trades. Once it works reliably no reason for you to do much at all other than monitor things, which sure as heck doesn’t take 4+ hours a day to do.
Thank you so much for the very informative video. I am learning a lot from you. please keep the hard work
Thank you!
You just saved us a bunch of $. Thank you.
Glad it was helpful 👍
learned a lot from your video, Jason. thank you for that. may i ask a question - can I have a LLC with my wife where I'm the primary active day trader and continue to do her job and volunteering activities unrelated to trading?
Good Vedio Jason. If a taxpayer is a sole member in a s corporation how is TTS reported on the 1120S?
Thanks much Jason. In regards to attaching form B to schedule D; I will have about 40 pages of trades so I will need to print out those 40 pages and attach to the schedule D?
Great information.
How do you know when you’ve been approved for TTS.? I want to file this year so I’ll be approved for next years taxes. If that makes sense.
The IRS does not formally approve or deny your TTS because there is no application process. If a taxpayer believes they qualify, they report their income and expenses on their tax return consistent with the treatment. If, in the future, the IRS decides to audit you, at that point they will ask for sufficient proof that you qualify for TTS.
You can do the TTS without the 475 election right? Like if I am profitable and don’t need to worry about the 3,000 losses, there is no reason to make that election right? I am trading spreads and options so wash sale isn’t applicable.
475 elections are a terrible idea in many cases. Section 1256 contracts for example.
Does anybody know what you do if you are a MTM trader, but now you're filing taxes on a year in which you no longer qualify for Trader Tax Status? I am having a really difficult time figuring out what the protocol is. You can permanently revert back with a form 3115, but I didn't file this with my extension. Some sources are saying that your MTM method of accounting is "suspended" and you therefore just file as any other person would, as an investor, not a trader. If anybody could provide some insight here I would GREATLY appreciate it!
Hey Jason, where do I reach out to learn more about potentially working with you on entity creation, taxes etc...?
Jason what An amazing break down thank you for your video! I’ve been researching this, correct me if I’m wrong. If I want to elect for MTM in 2024, i have to fill out a 3115 when I do my file my taxes in 2023?
Do you have any idea if you must have an LLC to deduct expenses? My account says that the TTS only applies to the wash sale capital loss rules but does not allow you to deduct expenses unless you are registered as a business but that doesn't seem correct from info I have been reading. thank you
What if I do mostly swing trading but after tax loss harvesting half my income was dividends and interest?
10:45. Question: So if you are TTS (Assume you are TTS already) but not MTM you still put trading income on Schedule D (NOT C). So if you have long term capital gains you still have long term capital gains benefits????. I am thinking of gains or loses from 1256 contracts tradings like SPX, /es,/NQ here 60% is long term and 40% short term by law.
Yes, that’s why I trade SPX.
Hey Jason--Thanks for posting. I wonder whether the open positions I help at the end of 2023 should dissuade me from claiming trader tax status with a mark-to-market election beginning with tax year 2024? In other words, I will have to file a form 3115 with a 481(f) adjustment--but will the adjustment be a disaster, costing me more than the worth of the TTS and mark-to-market election? How do I analyze this? can I hire you to assist and assess this issue? Thanks! Doug.
Any recommendation on a CPA that understands this status and is licensed in Wyoming?
Do I still need TTS status if I trade under an S-Corp or Partnership?
Good video! But I have to say it is probable you will me audited when the income is 0 on schedule c even though u r trader. Usually I would not suggest clients do that
Yes! That's exactly why I mentioned during the video that I do not recommend this for traders, as they should use either an S corp or partnership structure to avoid Schedule C. However, if you don't go down that path, these are the reporting instructions per the IRS.
So trader bros that trade 4 days a week can deduct the cost of an investment letter subscription. (which they won't be reading because they are trading 4 days a week)
And the investor that makes long term trading decision... cannot deduct the cost of an investment letter subscription.. even though he'd be the one studying it.
Essentially yes. The IRS is less concerned about how much you use the item that created an expense (e.g., the newsletter), and more concerned about the amount of time and level of activity spent on generating the revenue. The long-term buy and hold investors generally do not qualify for TTS because they aren't executing enough buy/sell trades during the year.
@@JasonDKnott and so the IRS encourages speculative noise. Meanwhile there is no record of the up-to-date share count of a company. And then they wonder why we get these bubbles and pops and crashes.
I guess people benefit from those bubbles and so the system will continue that way.
Apply TTS by ourselves or just hire a CPA to file TTS
Claiming TTS on a tax return is a substantial tax position which can result in red flags and potential audits. You want to make sure you actually qualify for TTS, which is why we always recommend working with a CPA or tax attorney on your taxes.
As far as I know TTS is not an election, not like 475 MTM is. There is no form or checkbox. You basically assert it by taking business expense deductions and using a relevant occupational code.
Hello is this the same filing for forex trading? In particular, would income/loss from forex be considered capital gain/loss on schedule C or could we characterize it as self employed income? Thank you for providing this educational video
how can I make a paid appointment with you to consult about TTS? thanks
What if you have a lot of both short-term trades and long-term holds? Can you segregate the short-term trades and long-term investments and treat them differently? I am kind of in that position. I have lots of both. I had over 1300 trades last year. Definitely met the other requirements, including spending as much time as I would on regular employment, investing in professional software, screeners, L2 data, etc. The only thing that worries me is the holding period. Mine is a mix. I have some that are three months, some a year or more. But the bulk is a month or less, I think. I'm not sure why one wouldn't be considered a trader if they have enough activity and short-term activity to qualify merely because they have other kids of trades that may be longer-term.
One other follow up question that I haven't seen answered anywhere else: If I don't qualify for TTS, are there any expenses that are nonetheless deductible? For example, it's my understanding I can still deduct margin interest. But what about investment in software, equipment, etc? I know I can't claim home office expenses (e.g. prorated rent/utilities) unless I qualify for TTS. But what expenses can I claim even without TTS? So complicated! Your video is very helpful, so thank you.
And I'm sorry: ONE more question. haha Turbo Tax advised me that I MUST elect for Section 475 Mark to Market status to file as a trader. But from what I can discern elsewhere, that's not true. Can you confirm that I can file as TTS status without marking the Mark to Market election?
Tax advisors recommend minimum of 1000 trades per year or 83 trades per month ( is this means if i open a position and close same day or next day , is it consider as 1 trade or 2 trades? if its consider as 2 trade then we only need to do 2 roundtrips (buy and sell) a day assuming 22 trading days a month.
Each open and close is treated as a separate trade. So when they say 1,000 trades, that could be 500 buys and 500 sells.
@@JasonDKnott Does options contracts count as extra trades? If I sell credit spreads and sell 100 and buy 100 options contract? is that 200 trades in a month?
Are closes via expiration considered trades or just explicit closes?
@@UnplayedGaming I’m pretty sure each spread is a trade, not each option contract.
I have been a 475 MTM trader for 5 years and this is the first year I will have losses. As a 475 MTM trader can you carry forward those ordinary losses ? Example, My trading losses this year will be $50k and I am not employed this year and have zero income. I expect to go back to work next year and have income taxes of approx $30k so is there a way to carry forward those taxes losses to offset my expected income taxes for next year?. What form would I use if thats possible... thanks I love your videos!
Hello Lou,
how you filled out form 3115 and 481a adjustment for the first after MTM elected?
thanks
@@IncomeTaxService1 I was hoping the NOL would carry forward
Keep watching❤😂