Source: http://www.traderstatus.com/doyourowntaxes.htm
Timestamp: 2018-01-17 13:18:28
Document Index: 485254599

Matched Legal Cases: ['§403', '§6045', '§6045', '§6045', '§6045', '§1', '§1']

Copyright© 1999, 2000, 2001, 2002, 2003, 2004 & 2007 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved.
A few years ago there were approximately five million people who were registered to trade stocks on-line1. In April 2000 about 50,000 were day traders3 These numbers are projected to increase four-fold to more than twenty million households2 and many of them need to make the choice to file there taxes as an investor or to file using trader status.
There is no reason why you, as a qualifying active trader, cannot file as a trader status taxpayer on your own using readily available tax preparation software. All it takes is your time and a good, thorough understanding of the methods used to file properly as a trader status taxpayer.
How thorough? Find out now, by taking this quiz, if you need an accountant and this summary on hiring a tax pro to prepare your taxes or not! While trader status concepts are more complex than anything in the quiz... If you do score well, you probably have what it takes to do just fine if preparing your own trader status tax return! Otherwise, please consider using TraderStatus.com
Become your own expert on Trader Status tax filings - order the TradersTaxPlan™ documentation, instructions and forms...
Click here for Schedule D / Form 4797 software.
But use CAUTION: Tax Court: "TurboTax" Defense, Still a No-Go
Washington (Nov. 15, 2006) - The U.S. Tax Court has again rejected a taxpayer’s attempt to pin the blame for their negligent tax return on tax preparation software
On Nov. 9, the court handed down an opinion finding against a petition filed in New Jersey by Henry R. Broderick.
According to court records, the petitioner blamed defects in his income tax return on software that he claimed to use in preparing the Form 1040 return. Broderick, who owns a consulting firm, understated his taxable income by more than $50,000, leaving him with no tax on his 2002 return. However, the court said the blame rested with taxpayer negligence -- which includes failure by the taxpayer to keep adequate books and records or substantiate line items properly.
According to the court, "Such a program is only an aid for preparation of a return and depends on careful entry of accurate information, which petitioner manifestly failed to do. Petitioner admits that he has the education to prepare and review his income tax return. ... Accordingly, petitioner’s use of software in preparing his return does not constitute reasonable cause for the errors in his return."
The court rejected a similar "TurboTax defense" in February. The full opinion for the Broderick case is available at www.ustaxcourt.gov/InOpHistoric/Broderick.SUM.WPD.pdf
The TraderStatusTax Notebook site offers a convenient way to organize your tax information (other than individual trades) which can then be forwarded to us to complete and sign your tax return as the CPA preparer.
At anytime during the process of entering your data in our online service you should become a full-service client and we can take over your tax file from where you left off, completing the tax work and signing the original tax returns as your CPA preparer.
As a securities daytrader you put your expenses on "Schedule C" and a listing of your trades on Schedule D (if a valid Mark-to-Market election was made by April 16, 2002 then use form 4797 instead of Schedule D). Answers to many general questions may be obtained via the site's FAQ listing. Answers to general common daytrader questions may be obtained via email once you start your "Schedule C." More detailed information is available by purchasing our 2002/2003 TradersTaxPlan™ documentation, instructions and forms... ($200)
Or you can find blank forms at these web sites:
Downloadable IRS Tax Forms
Downloadable IRS Tax Forms, year-by-year
Downloadable State Tax Forms
Downloadable State Tax Forms (Yahoo)
Downloadable State Tax Forms (Federation of Tax Administrators)
Downloadable IRS & State Tax Forms (TurboTax)
Downloadable IRS & State Tax Forms (Zillion Forms)
Downloadable Canadian Customs and Revenue Agency (CCRA) Tax Forms
Links to Legal Resources and Forms
Viewable Legal Bitstream - Tax Case Law Lookup
Viewable MegaLaw's Tax Law Page
Links to Employer Payroll Tax Registration Employer Payroll Taxes
Downloadable State Employment Taxes
Google search for CA State Employment Taxes (simply change the State)
Google search for CA State Business Taxes (simply change the State)
Viewable IRS tax rates and tax brackets
Viewable IRS FAQ and other information
Viewable Deloitte Tax Guide for 2004/2005 PDF file
Viewable IRS Addresses for tax returns
Viewable IRS Addresses for tax return (search)
Uncle Fed web site Uncle Fed's Tax board
NAICS codes (f/k/a SIC Codes) to use on tax returns NAICS Code Online Search
U.S. Census Bureau (NAICS codes) to use on tax returns NAICS Code Online Search
U.S. City information city-data.com
The North American Industry Classification System ( NAICS ) has replaced the U.S. Standard Industrial Classification ( SIC ) System Search.
Federal Taxpayer Identification Number (TIN) also known as a Federal Employer Identification Number (EIN) needed for many trader entities may be obtained online at http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
The "provisional EIN" number obtained via this internet link is also called an I-EIN or a "two-oh number" since all I-EINs are issued in the format 20-#######, through 2006. Starting in 2007: 26-#######. 27-####### has been used as well.
IRS information on TIN / EIN's:
IRS Instructions for form SS-4
IRS EIN FAQ
IRS publication 1635 "understanding your EIN"
While do-it-yourselfers are allowed to get their own TIN using IRS form SS-4 for their trading entity, we request that our clients and soon-to-be clients let us do the application for your TIN to avoid any problems or the raising of "red flags" on your account. You may legally authorize us to do this by signing a print-out of these linked pages:
http://www.irs.gov/pub/irs-pdf/i2848.pdf
and sending to us.
Extensions for filing form 1040 can be obtained by calling (888) 796-1074 between April 1, 2005 and April 15, 2005. Have a rough draft of a filled in extension form 4868 and your 2004 form 1040 when you call this telephone number. 2004 is planned to be the last year that the IRS will offer this option. Do not use this method if you are planning on electing M2M for 2005, which requires attaching the election statement to form 4868 and mailing both to the IRS via certified mail. You may not elect M2M using the telephone method.
Where to file your IRS extension request, form 1040 & estimated taxes: http://www.irs.gov/file/content/0,,id=105693,00.html
Beginning in 2006 (for 2005 tax returns) for individuals (form 1040) and for businesses (forms 1065, 1120, 1120S), an automatic six month extension (form 4868 or form 7004) will be automatically granted by the IRS.
Where to file your business IRS tax returns: http://www.irs.gov/file/index.html
You filed your tax return and you're expecting a refund? You have just one question and you want the answer now - Where the heck is my refund?
alternative IRS & State link:
IRS refund schedule for e-filed tax returns:
Tax rates / tax tables:
Note, effective with 2008, brokers are required to submit form 1099-B no later than later than February 15th of the following calendar year. (the prior law was January 31st)
Note, effective with 2011, securities brokers are required to do the trade-matching and provide the gain/loss report to the customer no later than February 15th of the following calendar year. (Pub. L. 110-343, Div. B, §403(a)(2), added subsec. (g) to IRC §6045). To better comply with this new requirement, IRC §6045 §6045A & §6045B cover special new rules for the reporting of options*, wash sales, "versus purchase" or VSP sales, transfers of securities into broker accounts, and corporate actions such as stock splits and spin offs. Wolters Kluwer Financial Services Cost Basis Reporting Resource Center
New form 1099-B reports to the IRS your wash sales and your FIFO taxable gain/loss for each sale made. Proposed instructions to securities brokers were issued on 12/17/2009 see Reg-101896-09
* As of November 2008 IR Regs §1.6045-1(a)(3)(vi) remains unchanged: "[The term "security" means:] An interest in a security described in paragraph (a)(3) (i) or (iv) (but not including options or executory contracts that require delivery of such type of security)." and Regs §1.6045-1(a)(9) remains unchanged "[The term "sale" does not include grants or purchases of options, exercises of call options, or entering into contracts that require delivery of personal property or an interest therein." Meaning - that taxpayers may need to continue to do their own trade matching when it comes to their options trading.
Now available to TD Ameritrade Apex clients, this free service powered by GainsKeeper® provides cost basis and capital gains calculations for transactions in TD Ameritrade Apex accounts. Realized gain/loss reporting can help you complete your Schedule D or Form 4797. Apex accounts will be able to access this service from the Balance and Positions page. Reports can be run with or without Wash Sales. A separate open positions Mark-to-Market report can be run for any applicable date. Positions and market values are updated nightly. Also download the report as a spreadsheet *.xls.
Now available to Charles Schwab clients, this free service provides cost basis and capital gains calculations. Realized gain/loss reporting can help you complete your Schedule D or Form 4797. Select Account, then select Gain/Loss and go to to the realized Gain/Loss report (Schedule D). Select the appropriate dates, then select Expand All Accounts and then select Export. Also select Account, then select History select (Beyond 24 months). Select Statements select Tax Forms then Search for Documents and select Year End Gain Loss Reporting 200x and save the PDF. Also select 12/31/0x Brokerage Statement and save the PDF.
Many on-line investors and on-line traders filing as trader status are doing their own tax returns right now. Taxpayers who qualify as a trader for tax purposes, using annually updated software, can save hundreds and even thousands in professional tax preparation fees each year.
When a taxpayer is audited by the IRS, CPAs generally bill additional on an hourly basis. Having done your own return and representing yourself in front of an IRS auditor can sometimes be imposing, but if you are well prepared it can save you these professional fees as well. Optionally taxpayer who prepare their own tax returns can retain a CPA firm to represent them if the IRS auditor comes to them with questions. For most taxpayers this is the best way to go... before replying to an IRS letter or make any contact with the IRS. Fill in (form 2848 form 2848 ) as best you can and get it to your tax advisor/representative rather than communicating with the IRS directly.
Audit Protection Insurance will cover some or all of the costs of CPA representation for your 2002 form 1040 using myself, or most any CPA of your choosing. This new coverage may even insure you against the taxes assessed and the interest charged as a result of the audit, and that's even if the errors were admittedly due to your own mistakes!
We hope that you find using the information found on this site and our newsletter to be an invaluable starting point. Of course this information is only for discussion purposes and some of the positions discussed are sophisticated and/or aggressive. Other positions are basic and conservative. As such, taxpayers may utilize the information contained therein only at their own risk. Even though thousands of traders file on their own, we must make this statement: "All taxpayers are advised that they should not rely on the information found on this site and our email and newsletters, but should retain the guidance of appropriate competent counsel familiar with their own unique situations."
Beware of the "wash sale" rule and generally of all the questionable tax advice found on the internet - such as the examples in our: Tax- advice Hall of Shame
Make sure to sign up for our free email newsletter to keep yourself informed of trader status issues.
Other links that may be obsolete:
Exposoft TaxData Utility downloaded program,
"This software helps you import trade transactions records" $12.95
More personalized, full-service trade tracking is available:
Traders Administrative Services, LLC offers time- and money-saving trade tracking,
capital gains calculations, and administrative services to busy trading professionals.
http://tradersadministrativeservices.com
1 Testimony of Arthur Levitt , Chairman of the U.S. Securities and Exchange Commission Before the Senate Permanent Subcommittee on Investigations Committee on Governmental Affairs, Concerning Day Trading September 16, 1999 "Technological advances have also fostered the development of a new kind of broker-dealer. These firms promote day trading, which discards many established investing principles, such as choosing securities to buy and sell based upon company fundamentals and performance. This new trading phenomenon, while well-publicized, is relatively limited in its reach, with the number of day traders estimated to be less than 7,000. By comparison, there are close to 80 million individuals that own stock and more than 5 million investors using the Internet for brokerage services."
2 A study by Jupiter Communications sees the online brokerage sector increasing assets seven fold from $415 billion at the end of 1998 to more than $3 trillion by the end of 2003. Online trading households are expected to grow from 4.3 million in 1998 to more than 20.3 million in 2003. They expect 41% of US households holding stocks to have online trading accounts in 2003. Gomez Advisors and Harris Interactive project that 2.85 million investors with offline brokerage accounts are "likely" or "extremely likely" to open an online brokerage account in the next six months.
3 Bear, Stearns & Co, analyst Amy S. Butte quoting from a newly completed report entitled "Day Trading and Beyond: A New Niche is Emerging." This report says that each day 75% of the online trading volume is done by day traders or so-called "semiprofessionals."
Various Payroll and Tax Links for the US States
2004 state unemployment wage bases announced:
Alabama . . . . . . . . . . . . $8,000
Alaska . . . . . . . . . . . . . $27,100*
Arizona . . . . . . . . . . . . . $7,000
Arkansas . . . . . . . . . . . $10,000*
California . . . . . . . . . . . . $7,000
Colorado . . . . . . . . . . . . $10,000
Connecticut . . . . . . . . . $15,000
Florida . . . . . . . . . . . . . . $7,000
Illinois . . . . . . . . . . . . . .$10,000*
Iowa . . . . . . . . . . . . . . . $19,700*
Massachusetts . . . . . . $14,000*
Michigan. . . . . . . . . . . . . $9,000
Minnesota . . . . . . . . . . .$22,000
Mississippi . . . . . .. . . . . $7,000
Missouri . . . . . . . . . . . . .$8,000*
Montana. . . . . . . . . . . . $20,300*
Nebraska . . . . . . . . . . . . .$7,000
New Hampshire . . . . . . . $8,000
New Jersey . . . . . . . . . . $24,300*
New Mexico . . . . . . . . . $16,800*
North Carolina . . . . . . . .$16,600*
North Dakota . . . . . . . . .$18,500*
Ohio . . . . . . . . . . . . . . . . . $9,000
Oklahoma . . . . . . . . . . . .$14,300*
Oregon . . . . . . . . . . . . . .$27,000*
Pennsylvania . . . . . . . . . .$8,000
Rhode Island . . . . . . . . . $14,000*
South Carolina . . . . . . . . $7,000
South Dakota . . . . . . . . . $7,000
Tennessee . . . . . . . . . . . .$7,000
Texas . . . . . . . . . . . . . . . . .$9,000
Washington . . . . .. . . . . $30,200*
West Virginia . . . . . . . . . $8,000
Wisconsin . . . . . . . . . . . $10,500
Wyoming . . . . . . . . . . . .$15,900*
* Taxable wage base increase
Click here for Salary.com's details of each State's UC taxation policies
Copyright© 1999, 2000, 2001, 2002, 2003, 2004 & 2007 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved