Entering day trader transactions in Proseries

[HOPE2]

Hi everyone. I see when I search for Day trader this one comes up: Entering day trader transactions in ProConnect.

How about Proseries? Whenever I am searching some can find somehow everything in ProConnect but Proseries does not have it. Please help me where can I select 

1. Election to Use Mark-to-Market Method of Accounting
2. Check the box for Mark-to-market election for traders [475(f)] in Proseries.

 

[Just-Lisa-Now-]

If you use the WHERE DO I ENTER button on the toolbar and type in ELE the list of elections should appear...is it in there?

[HOPE2]

Sadly, is not there this election: 

1. Election to Use Mark-to-Market Method of Accounting
2. Check the box for Mark-to-market election for traders [475(f)] 

I think Proseries does not handle it, filing tax return for stock traders.

[Terry53029]

All you have to do in ProSeries is to attach a pdf. Here is the statement that you need to attach from IRS:

A trader must make the mark-to-market election by the original due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. You can make the election by attaching a statement either to your income tax return if filed without an extension or to a request for an extension of time to file your return. The statement should include the following information:

1. That you're making an election under section 475(f);
2. The first tax year for which the election is effective (that is, the tax year for which a timely election is being made); and
3. The trade or business for which you're making the election.

[HOPE2]

Thanks a lot,  could you please explain more regarding part 3:

1. The trade or business for which you're making the election.

[Terry53029]

That would be your clients business name. (LLC, Partnership, Scorp, or Sole Proprietorship) What business entity is your client? 

[HOPE2]

Got it and really appreciate it. I have two clients . One has S Corp and the other one (sole-prop) should apparently file schedule C based on IRS : Topic No. 429 Traders in Securities (Information for Form 1040 or 1040-SR Filers)

Owner S Corp wants to shift his activity of stock trading to his S Corp but to be honest I am confused regarding 3115 form since traders are required to file a form 3115 but his S Corp has other activities like import and export which has already hybrid accounting method. 

How about if someone wants to open his/her business (new) with S Corp type also wants to be a day trader?

The individual one acts like sole-prop should he file 3115 as well? 

[Terry53029]

Your sole proprietor will file on schedule C, and his buys and sales are reported on form 4797 for all his securities activities that are not for his investment, and he will have to file a 3115. I believe it is an automatic change with a DCN number. Most traders will have both personal investments, and trader activities. As for an Scorp I believe the only accounting change is for the Scorps securities activities only, and all other activities will remain as is, but he still has to file 3115. That is only my understanding for the Scorp, as I have only done a sole proprietor

[HOPE2]

Thanks a lot , am I correct if so one S Corp can have two method; one for MTM and the other for routine activities or client should have one S Corp just for MTM, day trading along with its election.

For sole proprietor, will file on schedule C without SE tax, right, so how did you make your client exempt from SE tax since we have two lines on sch C which belong to forms 4029 and 4361 above the first QuickZoom on schedule C. 

 For sole-prop; he started trading in the beginning 2022 and already filed his 2021 return.  When he should file 3115? As I understood you explained and my searching form 3115 should file before April 15, 2022 for the year of 2022 trading, am I right? If so, what is the solution? Again, I really appreciate for your help. 

[sjrcpa]

If it's a new business in 2022, it adopts the accounting method on the first Schedule C. There is nothing to change.

Why an S Corporation for day trading?

[abctax55]

@sjrcpa ... because of all the liability associated with day trading??? /S

[Terry53029]

On the Scorp, My understanding is they use one for MTM, and one for everything else. For your sole proprietor go to schedule SE. and quick zoom to the SE adjustments worksheet, and use line 7 to enter amount not subject to SE tax 

[Terry53029]

Like @sjrcpa I don't see why anyone would be an Scorp

[IRonMaN]

"I don't see why anyone would be an Scorp"

Because the barber said so? 😉

[rbynaker]

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@IRonMaN wrote:

"I don't see why anyone would be an Scorp"

Because the barber said so? 😉

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An ex-client told me he wanted to do it so he could deduct his internet and cable TV bill.  You know because he used them for investment research so they're 100% deductible, right?  And he could put his car in the S Corp name and that would be deductible because it was owned by the business, right?  And if the S Corp owned the house he lived in . . .

[sjrcpa]

And he got all this from a seminar he attended.

[Terry53029]

Not a seminar. Like @IRonMaN said, his barber ! 😀

[HOPE2]

Thank you for your response. I still am not sure what the answer is. Is Day trading possible under S Corp without any problems? 

[HOPE2]

Thanks, should file 3115 before due date 2022 tax return along with Sch C you meant?

[sjrcpa]

It's possible but a bunch of us don't think it's a good idea. [