Can I claim Tax Trader Status (TTS) and Section 475 with my Florida single member LLC or need S-Corp?

Thanks for the clear answer! So just to be sure, since my LLC is taxed as a disregarded entity (haven't elected corporate treatment), I would make the Section 475 election on my personal tax return? And is there a specific form I need to file for the election?

You're welcome! Yes, since your LLC is a disregarded entity, you would make the Section 475 election on your personal tax return. For existing taxpayers, you need to file an election statement with your prior year tax return or extension by the original due date (usually April 15). The statement should identify that you're making a Section 475(f) election for the current tax year. After making the election, you'll report your trading gains and losses on Form 4797 instead of Schedule D. Just be very careful about maintaining separate accounts for any investments you want to keep under capital gains treatment, as those must be clearly segregated from your trading activity.

Did you find it actually helped with documentation in case of an audit? I'm worried about claiming TTS and having the IRS challenge it. Does it generate any kind of report to help prove you meet the requirements?

I've heard about taxr.ai but wasnt sure it was worth it. Does it work with all trading platforms? I use a mix of TD Ameritrade and Interactive Brokers and organizing everything has been a nightmare.

The documentation aspect is actually its biggest strength. It creates a detailed analysis showing your trade frequency, holding periods, and daily time spent trading - exactly what the IRS looks for when evaluating trader status. This report alone gave me peace of mind for potential audit defense. Yes, it works with all the major platforms including TD Ameritrade and Interactive Brokers! You can upload statements from multiple brokers and it consolidates everything. I was in the same boat with 3 different platforms and it organized everything seamlessly. It was honestly the first tax software I've used that actually understands how traders operate.

Wait, this actually works? I thought it was impossible to get through to the IRS these days. How much did it cost? I've had questions about my mark-to-market election timing that no one seems to be able to answer clearly.

This sounds like BS honestly. IRS agents aren't allowed to give tax advice, they just answer procedural questions. They would never tell you if you qualify for TTS because that's a facts and circumstances determination. Sounds like a waste of money to me.

It absolutely works! I was connected to an agent who handled business tax matters and while they can't give "tax advice" per se, they definitely clarified the rules and pointed me to the exact publications covering Section 475 elections for single-member LLCs. I got specific guidance on filing deadlines and procedures that I couldn't find anywhere else. I understand your skepticism - I felt the same way. You're right that they won't make a determination about whether your specific trading activity qualifies for TTS, but they can and will explain the requirements and procedures for making the elections properly. For me, that procedural clarity was exactly what I needed to move forward confidently.

Thanks for pointing this out! I definitely need to pay attention to that April deadline. Do you know if there are any special considerations for a trader who has both investment positions and active trading positions? I have some long-term holds I don't want to include in mark-to-market.

Great question - yes, you can absolutely maintain segregated accounts with different tax treatments. The Section 475 election can be applied to your trading business while keeping your investment positions under regular capital gains treatment. The key is maintaining clear separation between the accounts. You'll want to have dedicated accounts for your trading activity where Section 475 applies, and separate accounts for investments. This separation must be established before making the election and maintained consistently. Documentation is crucial - in case of audit, you need to clearly show which positions were investments vs trading positions. Make sure all your brokerage statements reflect this separation.

This is actually what convinced me to make the election. The wash sale tracking was driving me absolutely insane, especially trading the same securities repeatedly. But isn't there a downside with no preferential tax rates on any gains? I'm worried about paying ordinary income rates vs long term cap gains.

You're absolutely right about the wash sale benefit - that alone can save massive headaches for active traders. Regarding your concern about ordinary income rates vs capital gains, you have to weigh the trade-offs based on your specific situation. Yes, all your trading gains get taxed as ordinary income under Section 475, but remember - if you qualify for TTS, you can deduct all your trading expenses above-the-line (home office, equipment, data feeds, etc.) which often aren't available to regular investors. Plus no $3k annual limit on losses like you mentioned. For most active traders, the ability to fully deduct losses in bad years, avoid wash sale complications, and claim all business expenses usually outweighs losing the preferential capital gains rates. But definitely run the numbers for your specific trading patterns and income situation before deciding.

This is really helpful advice about the documentation aspect! I've been focused so much on the technical requirements that I hadn't thought about keeping detailed logs of my trading activities. Do you have any recommendations on what specific details to track daily? I want to make sure I'm documenting everything the IRS would want to see if they ever question my TTS status. Also, great point about the separate business checking account - I've been mixing some of my trading expenses with personal accounts which is probably not the best practice for supporting the business nature of my activities.

For daily documentation, I track: hours spent trading/researching (start/stop times), number of trades executed, brief notes on trading strategy or market analysis, and any business-related activities like platform research or education. I use a simple spreadsheet with date, hours, trade count, and notes columns. The key is consistency - even if it's just 2-3 lines per trading day, having months of records showing regular, substantial activity really strengthens your TTS case. I also save screenshots of my trading platforms showing active positions and research tools I'm using. Definitely get that separate business account set up! Not only does it clean up your expense tracking, but it shows the IRS you're treating this as a legitimate business operation. I run everything through it - data subscriptions, equipment, home office expenses, even mileage to trading seminars. Makes tax prep so much easier and supports the business classification.