1. If you file this year to MtoM it is not valid till NEXT year's filing '04 taxes filed in '05. It is not retro to '03.
2. Mark to Mkt is not that big a deal imo unless you hold large positions over the new year. It just takes paper +/-'s and plants them in the ending tax year and starts you out w/a new January 1st basis on holdings. Not too important for a short term trader.
3. As a short term trader, you should just expect to pay your marginal tax rate on NET profits at year end.
4. If you have had any net loss years, those losses are eligible as loss carry-forwards into the current years. All loss carryforwards should be netted out with current year gains until the losses are zero before you pay a nickel in current year taxes.
5. I think you can also take $3,000 loss carryforward against any other non trading income per year, if in fact you have any years that were net loss.
6. I explored this subject at length a few years back and elected to just treat trading as a regular business with the standard business deductions you would expect w/any other full time business. This election taxes one at the marginal tax rate based on year end net income just like a normal paycheck w/out the hastles of business licensing/taxing because of the special tax treatment allotted full time investing/trading. Trading is not treated as a business taxable business entity, but as investment activity.
Hope this helps. I am not an accountant, so take all of the above with a grain of salt. Check and confirm with yours. Finding an accountant with trading tax treatment knowledge is tough. good luck
Also, I use Quicken as personal accounting software. It allows for electronic download of all trading activity from your broker directly into the program. Saves incredible hours at tax time and shows clearly the millions of $$'s traded over a 12 month period, trade by trade, to justify the business claim.
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