Does software support Mark to Market stock trading accounting method against normal income?

jinspin
jinspin Member Posts: 1 Newcomer
in Filing my taxes

I have few questions regarding my tax situation before I start using FreeTaxUSA.

Your software supports self employment sole proprietor correct?

My tax accountant had declared Mark to Market accounting method back in 2004 filing for my stock trades as daytrader.
I want to use Mark to Market accounting method for my tax filings for all subsequent years including 2023.
Does your software ask me if I want to use Mark to Market and support Mark to Market accounting for stock trades against normal income? Does it provide any forms and calculations for it that need to be filled out? Is there any documentation on this if I need help filling out form?

I understand I can just put total stock proceeds, total cost basis, total wash sales and net in specific form correct? I don't have to enter every single trade correct?

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Best Answer

  • KristineS
    KristineS FreeTaxUSA Agent Posts: 252
    edited March 17 Answer ✓

    Hi jinspin,

    Thanks for writing in.

    FreeTaxUSA does NOT handle Mark-to-Market, for the self-employed on a Schedule C, since we don't support the reporting of gains on Form 4797, line 10, as it was designed, in your particular situation.

    Although we strive to support many common self-employment types of income, FreeTaxUSA does not support this rarer type of election for Traders specifically, as self-employed individuals filing Schedule C.

    You need to be able to deduct all your business-related expenses such a home office deduction or travel, or having an SEP-IRA for retirement. However, as mentioned before, we don't support the reporting of gains on Form 4797 for market-to-market elections.

    We do support Form 6781 and Section 1256 contracts, which are created based on entries. And the software program will run all necessary and required calculations on the form itself.

    Each Section 1256 contract held at year end is treated as if sold at fair market value on the last business day of tax year. Wash sale rules don’t apply. ​ Gains and losses are taxed 60% long-term and 40% short-term regardless of how long they were held.​

    You may need to enter transactions separately off Form 1099-B or separate/substitute statement. Contracts not reported on a 1099-B are also entered separately.

    To enter your information follow this path:

    INCOME > Uncommon Income > Contracts and Straddles > Section 1256 Contracts and Straddles

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