Tax Experts Break Down ‘Big Year’ of Changes

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Tax Experts Break Down 'Big Year' of Changes

Disclosure: This post is for educational purposes and should not be considered tax, legal or investment planning advice.

Have you seen the new tax laws? Wish you had a map to navigate them?

There are several new and revised 2018 tax forms based the Tax Cuts and Jobs Act of 2017. TradeStation brought in a panel of experts to help active traders understand them.

Certified public accountants Robert Green, Darren Neuschwander and Adam Manning from GreenTraderTax.com presented a webinar for TradeStation clients on the changes.

“This is a big year for taxes. A lot has changed,” said Green. The biggest takeaway? “Everybody wants into the trader tax status window.”

Claiming the status lets taxpayers deduct trading expenses, said Green. There’s also a big new qualified-business income deduction. Green describes various avenues to maximize business, home-office and startup expenses using tax-reporting strategies.

However, Green and his colleagues cautioned that many itemized deductions like investment fees and expenses disappear under the new law. (Look at Schedule A on Form 1040 for more.) Those who claim trader tax status can use Schedule C for deductions.

Here are more thoughts from the CPAs:

  • Look beyond items on tax form 1099-B for other activity to cover gains and losses. For example, some active traders may be able to switch to lower 60/40 capital gains rates in Section 1256 (Form 6781).
  • If submitted on time, you may be eligible to make an additional election statement using Section 475 for ordinary loss treatment. There may also be opportunities to report wash-sale losses differently.
  • Traders may benefit in the current year (2019) by making tax elections on time (such as electing mark-to-market to prevent wash sales). Green also said to consider a Section 475 election and an election to opt out of Section 988 for capital-gains treatment.
  • Avoid common errors on tax returns, which can lead to a federal or state exam.
  • Consider an automatic extension (in part so you don’t need to amend a return with updated dividends) and try to pay what you owe by April 15 of this year.

In conclusion, this tax season brings landmark changes for active traders. Some of the new rules could impact you.

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Jessica Kreger is Senior Manager of Client Training and Education at TradeStation. During her 20-year career, she has educated thousands of customers through positions at Dell, the University of Miami, Carnegie Mellon University, and Alcoa. Tapping into her passion for providing education that empowers active traders around the world, she has presented at several national technical communication conferences. Jessica earned an M.A. in Professional Writing from Carnegie Mellon and a B.A. in English from Penn State, and keeps her finger on the pulse of today’s trends as a Senior Member of the Society for Technical Communication and Certified Professional Technical Communicator.