Day trading tax questions?

Now just read the Tax Lady information very slowly and carefully and get a good understanding of about the information that she has included for your use and also use the IRS referenced publication that she has suggested to you to use for this purpose and a lot more information that you really need to read and understand at this time in your life.

Hope that you find the above enclosed information useful. 11/22/2011

Your broker may classify you as a pattern day trader, but the IRS doesn't care.

See IRS publication 550 and look at the day trader rules (around page 78). Pay attention to the definition the give--virtually no one qualifies for it.

If you are deemed to be an investor, you will list all sales of stocks/bonds for items held less than a year as short term capital gains on schedule D and pay your marginal rate on gains. Marginal is your tax rate, whether it's 10%, 15% all the way up to 35%. Your expenses would go on schedule A.

If you are among the few that can be deemed a day trader, if you do not make the MTM election, you still report the sales on schedule D, still pay the marginal rate, but the expenses move to schedule C. The folks who are both traders and make the MTM election move the sales to schedule 4797.

Note, schedule D has a $3000 limit on net losses per year. If you futz away a $50K nest egg, it could take you years to finish the writeoffs if you never trade again.

PS, if you plan to do a lot of trades--particularly in the same stock--you should look at buying software to track the buys/sells and prepare your schedule D for you. Tracking wash sales is a bear.

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if you truly are a day trader, comply with all the requirements of a day trader you report your income on Sch C, as a business