IRS has delayed by one year the cost basis reporting requirement for stock options, puts and calls, until positions opened after December 31, 2013. It is not clear if IRS has also pushed back, as expected, the 1099-B reporting of gross proceeds from the sale of stock options - IRS Notice 2012-34 May 2, 2012

Eduardo Saverin, the Facebook co-founder with a net worth of $2B, has renounced his U.S. citizenship ahead of the company’s IPO. Saverin graduated magna cum laude from Harvard in 2006 with a degree in economics. He was president of the Harvard Investment Association and member of the Phoenix S.K. Club. - Federal Register April 30, 2012

A well-established provider, perhaps indicative of problems faced at some other brokerage firms, delayed until April 2, 2012 corrected form 1099-B trade information.  Then on April 3rd they announced that additional corrections to the corrected form 1099s need to be made. It is probably advisable for traders to file tax return extensions until all potential problems with trade data at all brokers have been given enough time to be verified by industry members. - Penson Daily Operations Notices 12-03-33 & 12-04-05 issued March 20, 2012 & April 3, 2012

IRS "Fresh Start" initiative, will eliminate some late payment penalties for unemployed taxpayers and offer an expanded installment agreement program (for those behind on paying less than $50,000 in tax, vs. the previous under $25,000 requirement - with new IRS Form 1127-A postmarked before 4/18/12) and a new streamlined Offer in Compromise program (OIC). - Announcement IR-2012-31 issued March 7, 2012

Under current law, on January 1, 2013, there's going to be a massive fiscal cliff of large spending cuts and tax increases.  A "credible plan" is needed to reassure markets that the nation is repairing its finances. Failure to do so could trigger another financial crisis and sharply higher interest rate, as is happening in Europe. -  Federal Reserve Chairman Ben Bernanke, February 29, 2012

Austerity measures by some States this year include not mailing out 1099s to taxpayer for the prior year State Income tax overpayments. But those States are efiling the 1099s to the IRS, so there will be no free ride here!  Taxpayer's are on their own to find out the amount reported to the IRS.  NY for example requires a telephone call to 518-457-5181 or a visit to www.nystate.gov

Odds of being audited:
1:8 taxpayer earning over $1MM were audited in the past year.  1:25 are the odds for individuals earning greater than $200,000.   1:100 for people earning less than $200,000.  1.6MM tax returns were audited, out of 141MM form 1040 returns filed.  8 out of every 10 audits resulted in additional taxes being assessed.  Corporations: 1:100 odds for those with assets under $10MM. -  derived from IRS announcement, January 5, 2012

2012 FATCA - Bad U.S. Tax Policy panned by worldwide news agencies -  article in Forbes 12/30/2011

For 2011, taxpayers with any financial account maintained by a foreign financial institution or any securities issued by someone that is not a U.S. person may be required to file IRS Form 8938 along with their regular income tax forms. Taxpayers are subject to a $10,000 late filing penalty and the burden of compliance for some European institutions is too expensive and will result in closing accounts held by U.S. citizens. -  derived from IRS announcements, January 2012

In 1979 the top 1% of income earners paid 18.3% of the total tax bill, by 2006 they were paying 39.1%.
In 1979 the top 10% of income earners paid 48.1% of all taxes, by 2006 they were paying 72.8%.
In 1979 the top 40% of income earners paid 85.1% of all taxes, by 2006 they were paying 98.7%.
In 1979 the bottom 40% of income earners paid 4.1% of all taxes, by 2006 they were receiving  3.3% in direct payment from the US Treasury. -  Phil Gramm, fmr US Sen, October 3, 2011

Per the GAO, there were 248,357 incidents of taxpayer Identify Theft in 2010, compared to 51,702 in 2008. However the IRS only initiated roughly 4,700 investigations of all types, which is far less than the Identity Theft cases alone! IRS explains that the reason local cases are seemingly getting a pass is that with the huge volume of fraud, the CI division concentrates of schemes of national scope.  Tax identity thieves typically submit tax returns for refunds early in the filing season. The legitimate taxpayer usually files later, and only then learns from the IRS that two returns were filed using the same Social Security number. Victims are issued an "identity protection personal identification number" IP PIN, which the IRS will use to process future returns. A new IP PIN will be issued each year the taxpayer's account has been marked for potential fraud. -  derived from comments made by IRS Commissioner Douglas Shulman, June 2011

20,000 randomly selected LLCs, partnerships and corporations are being selected by IRS for a time and expense survey regarding the preparation of their income taxes, if you receive the letter from the IRS please contact us. -  Kiplinger Washington Editors, August 2011

A good wake up call...  I don't think S&P was looking so much at our  deficit or our debt, what they were looking at is our unfunded liabilities - more than 100 trillions dollars of promised spending on entitlement programs in the future; we don't have that money! That's where America is in trouble. - Daniel J. Mitchell, Senior Fellow, CATO Institute, August 7, 2011

If the U.S. Government were a family, they would be making $58,000 a year and spending $75,000 a year, on top of having $327,000 in credit card debt. They are currently proposing 'big' spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget and debt, reduced to a level that we can understand. - Attributed to Dave Ramsey, August 2011

For years we've been told that our kids and grandkids are going to have to pay the price for our out-of-control spending.  Now it turns out WE have to pay for it?  That was not part of the deal. - Jimmy Kimmel, August 8, 2011

Proposal for a 0.1% to 0.5% "Tobin tax" on transactions in futures and securities purchases and securities sales.  Example: a $50,000 trading account fully involved in day-trading, averaging 5 round turns per day would incur a tax of $100,000 at the lowest proposed $0.1% rate. - Congressional Democrats including Peter Defazio (D-OR-4th), August 2009

After leaving public office, this person opened a hotel right down the road from our CT office; creating many jobs to renovate and operate the business,  It eventually went into bankruptcy after a few years of frustration of dealing with gov't bureaucracy.  He wrote "I ... wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face ... public policy does not consider whether we are choking off [business]." - George McGovern, fmr US Sen, June 1, 1992

There should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax. - Sen. Barney Frank (youtube)

There are two systems of taxation in our country: One for the informed and one for the uninformed. - Judge Learned Hand

Collecting more taxes than is absolutely necessary is legalized robbery. - Pres. Calvin Coolidge

The most dangerous thing you can do to any businessman in America is to keep him in doubt, and to keep him guessing on what our tax policy is. - Pres. Lyndon B Johnson

Our tax code is so complicated, we've made it nearly impossible for even the Internal Revenue Service to understand. - Treas. Paul O'Niell

I have wondered at times about what the Ten Commandments would have looked like if Moses had run them through the U.S. Congress. - Pres. Ronald Reagan

Looking for tax deductions?

Short-term trading is fast... exciting... profitable... challenging... and tax deductible!

When you tally up your results each year - do you see the capital gain tax taking away too much from your hard won trading profits? As an active trader do you find that you have too little time at the end of the day to do the necessary tax planning to avoid paying excessive income taxes? What is the real story behind all the talk about the tax benefits from choosing trader status and electing mark to market?

When is a CPA firm needed?

Serving Traders for over 20 years!        We'd Like to hear from you

Here at TraderStatus.com™ we will bring together in one place the information necessary to help you survive unnecessarily high short-term capital gain taxes, self-employment taxes and state and federal income taxes. To accomplish this, often a separate trading entity is the answer, but just as often we avoid it as not being cost effective in a particular situation.

Many traders do not yet even realize that they are paying far too much to the Federal Government. Existing, proven legal procedures, which in many cases can significantly reduce taxes each and every year, are available to anyone qualified to elect to use them.

As we all eventually learn, those low capital gain tax rates of 15% or lower are not available for the daytrader's lightning fast trading profits. Rather, an individual daytrader's gains (or losses) are subject to the higher ordinary income tax rates!

Investors and securities traders may incur substantial costs with on-line fees, commissions, real-time data-feeds, computer equipment and so on. The Internal Revenue Service, on their own, do not treat most taxpayers very fairly when it comes to deducting these expenses. Leaving it up to the IRS publications and instructions, at best, a taxpayer must first qualify to itemize his deductions on Schedule A - making those deductions subject to a 2% of Adjusted Gross Income (AGI) reduction and for some high-income taxpayers even an additional 3% of AGI reduction.

Please take the time to read and understand the information found on our web site and also on the Discussion Board as it can be very helpful to you when preparing your taxes and when planning your tax strategies.  Every month we hear from taxpayers who found this web site too late or after they already paid someone for a download that contained nothing more than the basic information here available to you for free.  Taxpayers who were ill-advised by normally very competent CPAs and other tax practitioners, but for whom the tricks and traps  of Trader Status were unknown to them.

A good CPA does not need to know everything, he only needs to know where to look it up when a problem arises, or when he's doing your tax planning.  Unfortunately the hard facts are that, when it comes to traders in securities and traders in commodities, many tax advisors have no clue that there even is a Trader Status issue to look up, let alone having the practical hands-on experience necessary to be aware of the tricks and traps to be found!