When it comes to trader tax, several tax reporters at the WSJ consider Robert Green and Darren Neuschwander good resources.
Wall Street Journal, Tax Report (2/19/16) by Laura Saunders. “The Worst Tax Form.” Form 1099-B, in which brokers report a taxpayer’s investment income, can cause delays and revisions. Here’s how to minimize the damage.
Excerpt: “Double-check “wash” sales. If an investor sells a security at a loss and purchases a “substantially identical” position within 30 days on either side of the sale, the transaction is known as a wash sale, and the capital loss is deferred. That means it can’t be used right away to reduce a capital gain. For example, this rule bars the taxpayer who sells one broker’s version of an S&P 500 fund and soon buys another firm’s version of the same fund from creating tax losses.
Robert Green, of Green TraderTax in Ridgefield, Conn., warns that there’s a gap between what brokers are required to report to the IRS as wash sales and what taxpayers are. For example, if an investor trades Apple stock options within 30 days of selling Apple shares at a loss, this move counts as a wash sale for the taxpayer. But brokers aren’t required to report it on the 1099-B. Taxpayers will be on the hook, however, if an IRS auditor comes calling. So Mr. Green advises investors to check for wash sales, especially if they trade frequently.”
WSJ Market Watch (12/17/13). Robert Green is quoted in “Investors may not want bitcoin to be a real currency” dated Dec. 17, 2013, by Jonnelle Marte, MarketWatch (TaxWatch column).http://on.mktw.net/1kS9fd2. Green sees losses on the horizon with volatility and expects some clients to ask about using ordinary loss treatment using currency tax rules.
Wall Street Journal (9/27/13) “Tax Report: Are You a ‘Trader’ to Your Country?” by Laura Saunders. After reading Robert Green and Darren Neuschwander’s 8/30/13 blog “The Tax Court Was Right To Deny Endicott Trader Tax Status,” Ms. Saunders interviewed and quoted Robert Green for her excellent article. Excerpts.
- The case matters to hedge funds as well as individual investors, says Robert Green, a New York CPA whose firm, Green NFH, specializes in advising traders. “If a fund’s strategy changes and it doesn’t meet the strict definition of trader, then both it and its investors will lose valuable benefits,” he says.
- Mr. Green, whose firm prepares more than 1,000 tax returns for traders each year, says he would have advised Mr. Endicott against claiming trader status given his facts.At a minimum, Mr. Green says, traders should average at least 1,000 trades a year and execute trades three to four days a week. In addition, he advises conducting the trading business in a separate entity such as a limited-liability company, to segregate it.He adds: “This case is a great warning shot.”
Wall Street Journal (8/23/13) “Funding Startups With Retirement Cash Presents Challenges” (Getting Going), By Karen Blumenthal. After reading Robert Green’s 7/24/13 blog “Learn the DOs and DON’Ts of using IRAs..,” Ms. Blumenthal interviewed and quoted Robert Green for her excellent article.
- Excerpt: All of that points toward proceeding cautiously and seeking expert advice before making such an investment. “If you’re the kind of person who doesn’t want any trouble, why go there?” says Robert A. Green, a certified public accountant and chief executive of GreenTraderTax.com, which advises traders.
Wall Street Journal (3/1/13) “When Your Broker ‘Outs’ You” (Tax Report), By Laura Saunders. Robert Green & Darren Neuschwander are quoted in the article.
- Excerpt: Check 1099-Bs for mistakes. Robert Green, an accountant who heads GreenTraderTax, a tax preparer for more than 1,000 investors, urges taxpayers to double-check brokerage cost-basis reports against their own records. “Often the 1099-Bs don’t match trading logs,” he says, especially for frequent traders. In some cases, he has seen income over- or understated by $10,000 or more. Problems arise most frequently with wash-sale reporting, he says. Investors subject to the new reporting should think twice before filing early, says Mr. Green’s partner, Darren Neuschwander. Last year, some clients received five corrected versions of the same 1099-B, he says. Early indications are there will be many corrected forms this year, too, he adds.
Wall Street Journal Blog (5/3/12) “IRS Delays Cost-Basis Reporting for Bonds and Options” (Total Return), By Laura Saunders. Quoted Neuschwander for this important story update. Green NFH may be succeeding in getting the IRS to offer relief.
- Excerpt: Experts welcomed the news. “Considering the trouble we’re having with rules already in effect on the cost basis for stocks, it makes sense to delay the rules on debt and option reporting,” says Darren Neuschwander of Green NFH in Robertsdale, Ala., who has a nationwide practice for active investors.
Wall Street Journal (3/30/12) “Last-Minute Tax Tips” (Tax Report), By Laura Saunders. Green & Neuschwander are pushing top tax writers to advance the story.
- Excerpt: Darren Neuschwander, a CPA and co-head of Green NFH in Robertsdale, Ala., says he is reluctant to sign returns given the current confusion. Mr. Neuschwander estimates that 80% to 85% of his more than 1,000 stock-trading clients have incorrect or inconsistent 1099-B forms. He expects to file extensions for most of them to work out glitches. Robert Green, also a co-head of Green NFH, says the problem isn’t limited to people who make hundreds of trades in a year. “We had a client who only made seven stock trades last year, but on the 1099-B six out of seven didn’t match the broker’s trade confirmations,” he says. Both accountants say they have seen issues with every brokerage firm their clients use.
Wall Street Journal (3/14/12) “Dodging a ‘Cost Basis’ Crisis” (Getting Going), By Karen Blumenthal. Green & Neuschwander are breaking the story about botched 1099-Bs, apples and oranges and a tax filing stalemate. Our angle to this story is just getting out. If you are in the media, please contact us to discuss this story soon.
- Excerpt: Try not to rush your return. Investors were supposed to receive the new 1099-Bs by Feb. 15, but a number of firms sought extensions of up to a month to get correct data out to investors. Corrected forms could still arrive in coming weeks. Robert Green, whose accounting firm Green & Co. represents active traders, says he has seen numerous errors and discrepancies between 1099-Bs and his clients’ calculations and will be seeking extensions while the differences are sorted out.
NEW YORK (Dow Jones)–Trader Tax Status Holds Benefits if You Qualify
By ARDEN DALE
December 12, 2006; Page D2
If you’re a serious stock trader, you may be eligible to get a serious tax break. For those who qualify, so-called trader tax treatment can be a real boon: They are able to deduct extra expenses and, even better, can elect to write off all trading losses.
Not everyone who trades a lot is eligible, however, and trader tax status is considered complicated and controversial, even among certified public accountants. “It’s the greatest thing since sliced bread, but you don’t want to get caught in the slicer,” says Robert A. Green, chief executive of GreenTraderTax.com and author of “The Tax Guide for Traders.”
Trader tax status was created by the Taxpayer Relief Act of 1997, near the height of day-trading mania. People who trade heavily have been getting the break ever since by filing returns as “traders in securities.” It isn’t clear how many people actually get the status, and the Internal Revenue Service hasn’t tracked the data, according to a spokesman.
Trader tax status has two main benefits: First, it allows more business-expense write-offs. A regular investor gets limited expense deductions, while traders get an almost unlimited number.
Second, trader tax status lets some people write off all trading losses by choosing to use “mark-to-market” accounting. In mark-to-market accounting, a trader calculates the worth of his securities based on their market value at the end of the year. If the stock has gone down in value, he may report a loss without actually selling it. Conversely, if the stock has gone up, he must report a gain.
You must elect to use mark-to-market accounting in writing before filing a return, and you should file IRS Form 3115 a year later, according to Colin M. Cody, a Connecticut CPA who founded the Web site www.TraderStatus.com in the late 1990s. If the mark-to-market election isn’t made, a trader’s gains and losses are reported as capital gains and losses on Form 1040 Schedule D. “For many traders, mark-to-market is a worthwhile election,” says Mr. Cody. “They should always talk to an adviser, though. It’s permanent, and there are situations where it’s not appropriate.”
Being able to write off big losses is what tempts amateur traders to try for trader tax status. Desperation drives some who clearly wouldn’t qualify to hope for the break. A real-estate mogul recently asked Mr. Green if he could get trader status to write off $3 million that he had lost in gold futures. The answer was a resounding “no,” because his trading had been only sporadic.
Many do use trader tax successfully, however, from stay-at-home parents to surgeons, laid-off workers with buyout packages and even college kids who trade avidly.
To qualify, one must meet certain tests. Heavy trading of stocks, futures, foreign exchange or other instruments is a requirement. One also must profit from daily market moves rather than dividends, interest or capital appreciation.
Still, many tax advisers say IRS rules on trader tax are vague enough to cause problems. “It’s a gray area,” says Thomas P. Ochsenschlager, vice president of taxation at the American Institute of Certified Public Accountants. “I think someone is being aggressive if he has a day job and tries to claim the tax benefit of being a trader. The burden of proof for someone like that would be substantial.”
Write to Arden Dale at firstname.lastname@example.org