One of the biggest questions asked - other than "How do I make a profit?" - is how do I file my taxes.  As trading filing rules are a little more complex than your simple 1040ez statement, FuturesKnowledge.com has put together a list of informational suggestions with the help of GreenTraderTax.com that should guide you through this process.  Please note - we are not a certified accountant, therefore, you should varify all of your tax questions with either your local or national government offices (aka: IRS).

2002 tax law changes benefit traders [Return to Traders Tax Home Page]

A summary of the beneficial tax law changes that apply specifically to traders:

• Net Operating Loss (NOL) carry-back period extended to five years.
  Net Operating Losses generated in 2001 and 2002 may be carried back five years. The old rule was two years, although you are not required to use the five-year carry-back. You may still carry back NOLs two years. However, the option of the five-year carry-back is eliminated in 2003. See our NOL page for more details. Click here.
• Alternative Minimum Tax (AMT) is not a factor for 2001 and 2002 NOL carry backs.
  See our NOL page for more details. Click here.
• Depreciation expense increased for items purchased after Sept. 10, 2001.
• Single-stock futures classified as securities rather then commodities.
  "Single-stock futures" are called "securities futures contracts" by the IRS. “A securities futures contract is not treated as a commodity futures contract for income tax purposes." This means that single-stock futures are taxed like securities rather than commodities.
• (Rev Proc change) Negative IRC § 481(a) adjustments greater than $25,000 no longer need to be prorated over four years. Good news! The IRS has changed the tax laws for first-year IRC §Section 481 (a) adjustments. The new rule is that starting with the 2001 tax year, all first year IRC §Section 481 (a) adjustments are reported 100 percent in the year you convert from the cash method to the mark-to-market accounting method (IRC §475). The only exception to this is the "de minimis rule," which now applies to positive adjustments only. A full analysis of these new rules, including transition and what to do if you already filed your 2001 tax returns, are in our Trader Tax Status & Mark-to-Market Accounting Guide.
• (Rev Proc change) New rules for changing your accounting method to MTM in 2001 and 2002. A full analysis of these new rules, including transition and what to do if you already filed your 2001 tax returns, are in our Trader Tax Status & Mark-to-Market Accounting Guide.

For a full analysis of the "Job Creation and Worker Assistance Act of 2002," and revised tax forms, go to www.irs.gov (the page has a link to "New Law May Cut Your 2001 Tax." We publish a copy of that IRS page below).

For the section of the IRS Web site entitled "Highlights of 2001 Tax Changes," click here: www.irs.gov/pub/irs-pdf/p553.pdf.

New Law May Cut Your 2001 Tax
article copied from http://www.irs.gov/irs/news/0,,i1%3D42%26articleId%3D81390,00.html

Note: Most Forms, Instructions, and Publications are currently being revised, but are not yet available. We expect to have the revised documents posted very quickly, and will add appropriate hyperlinks below as they become available.

Tax Year 2001 Forms and Instructions Changed by the Job Creation and Worker Assistance Act of 2002

The recently enacted Job Creation and Worker Assistance Act of 2002 may reduce your taxes for 2001 if you acquired depreciable property after September 10, 2001. You may also be able to carry back a net operating loss from a tax year ending in 2001 or 2002 to the 5 preceding tax years. If you have already filed your 2001 tax return, you may wish to file an amended return.

New 30% First-Year Special Depreciation Allowance
If you acquired depreciable property after September 10, 2001, with a recovery period of 20 years or less, you may be able to claim an additional 30% first-year depreciation allowance. If you acquired, after September 10, 2001, a passenger automobile used more than 50% in a qualified business use, you may also be able to claim the additional 30% first-year depreciation allowance. More generous depreciation rules apply to certain property acquired after September 10, 2001, and used in the area of New York City damaged in the September 11, 2001, terrorist attacks.

Form 4562, Depreciation and Amortization, and its instructions have been revised to reflect these changes.

Form 2106, Employee Business Expenses, and its instructions have been revised to reflect the new depreciation rules for vehicle expenses.

Amended return: If you have already filed your 2001 income tax return, you may use Form 1040X, Amended U.S. Individual Income Tax Return, to claim the additional 30% first-year depreciation allowance. Click here to get Form 1040X and its instructions.

Additional Depreciation Guidance: A supplement to Publication 946, How To Depreciate Property, will explain the depreciation changes in the new law. A supplement to Publication 463, Travel, Entertainment, Gift, and Car Expenses, will explain the depreciation changes specific to automobiles. When they are released, links to these publications will be placed here. Revenue Procedure 2002-33 provides procedures for claiming, or electing not to claim, the additional 30% depreciation.

Net Operating Loss Carrybacks and Carryforwards
If you carried back a net operating loss (NOL) from a tax year ending in 2001 or 2002, under the new law you may carry it back for 5 (instead of 2 (or 3)) years. If you owe alternative minimum tax, any alternative tax NOL deduction attributable to an NOL carried back from (or carried forward to) a tax year ending during 2001 or 2002 is allowed to offset 100% (instead of 90%) of your alternative minimum taxable income determined without regard to that deduction.

The following individual NOL products will be revised to reflect the new law. A link to the revised product will be added to each item when it is available.

Form 1045, Application for Tentative Refund, is generally used to carry back NOLs. Its instructions will be revised to explain the new carryback rules.

The instructions for Form 6251, Alternative Minimum Tax-Individuals, will be revised to explain the new 100% offset for the alternative tax NOL deduction.

Additional NOL Guidance: A supplement to Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, will explain the new carryback rules. News Release IR-2002-66 introduces Revenue Procedure 2002-40, which provides procedures for electing a 2-year or 5-year carryback period.

Corporate and Other Business Products to be Revised
The following additional business products will be revised to reflect the new law. Links to them will be placed here when the revisions are completed.

The instructions for Form 1139, Corporation Application for Tentative Refund, and the instructions for Form 1041, U.S. Income Tax Return for Estates and Trusts, will be revised to explain the new rules for NOL carrybacks.

The instructions for Form 4626, Alternative Minimum Tax- Corporations, and the instructions for Form 1041, U.S. Income Tax Return for Estates and Trusts, will be revised to explain the new 100% offset for the alternative tax NOL deduction.

Form 5884, Work Opportunity Credit, Form 8835, Renewable Electricity Production Credit, and Form 8861, Welfare-to-Work Credit, will be revised to reflect the extension of these credits.

Form 8834, Qualified Electric Vehicle Credit will be revised to reflect the postponement of the phasedown of the credit.

New Form 8884, New York Liberty Zone Business Employee Credit, will be developed to claim this credit, which is similar to the Work Opportunity Credit.

Form 8038, Information on Tax-Exempt Private Activity Bond Issues, and its instructions will be revised to reflect the new Liberty Zone private activity bonds.

New Publication 3991, Highlights of the Job Creation and Worker Assistance Act of 2002.
This publication will highlight provisions of the Act that take effect in 2001, 2002, and later years. When it is released, a link to it will be placed here.

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DISCLAIMER:  Futures Trading involves a huge risk of financial loss!  FuturesKnowledge.com is a traders research and resource site - and is not meant to be used as a guide for trading.  Due to the large risk involved - we highly recommend that you consult with a number of different resources before attempting to invest in the futures, commodities, options, or any other market we report on.

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