IRS on traders:

Is there any publication that explains the proper way to file a Schedule C as a day trader?

Publication 550, Investment Income and Expenses, which is specific to traders, includes a section titled Special Rules for Traders in Securities.

Internal Revenue Code section 475(f) and Revenue Procedure 99-17 apply only to traders who elect mark-to-market.

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I am a stock day trader. I understand I have the option of electing mark-to-market accounting which would eliminate the wash sale rule. What forms and publications do I need?

If your trading activity is a business, your trading expenses would be reported on Form 1040, SCHEDULE C, Profit or Loss from Business (Sole Proprietorship) instead of Form 1040, SCHEDULE A, Itemized Deductions. Your gains or losses, however, would be reported on Form 1040, SCHEDULE D, Capital Gains and Losses, unless you file an election to change yourSome forms you might be looking for method of accounting.

A change in your method of accounting requires the consent of the Commissioner and can not be revoked without the consent of the Secretary. You need Form 3115, Application for Change in Accounting Method, to change your method of accounting. Revenue Procedure 99-17 states when an election must be made. Revenue Procedure 99-49 provides procedures for changing your accounting method.

If your trading activity is a business and you elect to change to the mark-to-market method of accounting, you would report your gains or losses on Part II of Form 4797, Sales of Business Property.

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