Hello everyone and Happy New Year.
Based on the fact that I am day-trading more and more (avg. about 2,000+ trades annually over the last 10+ years), I am thinking of finally applying to the IRS for mark-to-market accounting. I would think that I qualify as a trader (rather than investor) as I hardly keep any positions overnight and at the end of 2019, and 2020, I did not hold any positions. I would have no problem doing the same going forward.
I have read as much as I can, and due to the fact that I have NO carry-over short-term or long-term losses, I don't believe I have anything to lose. However, I do have a few quick questions to the experts here. If it makes any difference, I reside in the state of New York.
1) Since it is now year 2021, am I still able to somehow re-classify myself for the tax year 2020 or is it too late? This would of course help me to get rid of any & all wash-sales that have already happened.2) By when must I file form 3115? Is there anything else that I need to file? I see that due to Covid, one can actually file it electronically.
3) I am not asking for tax advise, but I need to understand one thing. Here are the two examples that apply for my question at the very end:a) Using NORMAL capital gains rules: I loose $20K (short-term capital) in my trades at the end of year XXXX. That amount is added to the rest of my gains / losses / expenses of my other income. I can only use $3K of the $20K loss for that particular calendar year, with $17K being carried over to the next one. The rest of my TAXABLE income comes out to $150K, and I pay tax on that.
b) I loose $20K (using mark to market) in my trades at the end of the year XXXX. Since nothing is carried over (due to mark-to-market rules), am I able to use the full $20K against any other income, or is there a percentage cap, or a monetary cap per calendar year that one can only use a maximum of a certain amount of equity / options / futures losses per year against your other income? Meaning: The rest of my TAXABLE income would be a total of $133,000 (because I am not just using the $3K loss deduction, but would then be able to utilize the $17K too).
Am I correct or am I missing something?
4) If I do switch to mark to market, and lets say 5 years later want to switch back to normal accounting method, would I be allowed to do so?I appreciate your feedback on these questions.
Stay safe and healthy!