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F. A. Q.
Daily Tax Briefing
Daytrader and tax sites
  Copyright© 1999, 2000, 2001, 2002 & 2003 Colin M. Cody, CPA and, 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, can not 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

Become your own expert on Trader Status tax filings - order the
TradersTaxPlan documentation, instructions and forms...

Click here for Schedule D / Form 4797 software.

File your 2002 federal and state income tax returns at DoYourOwnDaytraderTaxes.  Both your federal and your home state income tax return can be electronically filed for one reasonable price.  (e-filing is not recommended for many returns claiming significant daytrading activity. We recommend that you print the return out, attach the details of your trades and send via certified mail).

Expert help and advice will be available to you as needed once you start working on your trader status "Schedule C."  The normal $49.95 price includes basic email support.

The site offers the same basic quality tax preparation for $24.95 without the added help for daytrader assistance.

At anytime during the process of entering your data in either of our online services you may consider upgrading to become a full-service client and we can take over your tax file from where you left off, completing the tax filings 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)

EXTENSIONS for filing form 1040 can be obtained by calling (888) 796-1074 between April 1, 2003 and April 15, 2003.  Have a rough draft of a filled in extension form 4868 and your 2001 form 1040 when you call this telephone number.  Do not use this method if you are planning on electing M2M for 2003, which requires attaching the election statement to form 4868 and mailing both to the I.R.S.  You may not elect M2M using the telephone method.


Where to file your IRS extension request, form 1040 & estimated taxes:,,id=105693,00.html

Where to file your business IRS tax returns:,,id=105081,00.html

These are some of the automated "Schedule D" programs available from other web sites  (some may have free demo versions available):


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
email and 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.



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."





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