What do those Form 6781 elections mean for SPX and VIX options?

The Form 6781 elections can be confusing, especially when switching between different tax preparation methods. Let me break down what those elections mean for you: 1. The "Net section 1256 contracts loss election" allows you to carry back losses from section 1256 contracts to offset gains from the previous 3 years. This can be beneficial if you had profits in prior years and want to recoup some taxes paid. 2. "Mixed straddle election" lets you remove positions from section 1256 treatment when they're part of a mixed straddle. 3. "Mixed straddle account election" is for those who regularly trade both section 1256 contracts and non-section 1256 positions as part of the same strategy. 4. "Mark-to-market election" is typically for traders who want to treat all securities as if sold at year-end. Since you're trading SPX and VIX options (which are section 1256 contracts), if you had a net loss this year, the "Net section 1256 contracts loss election" would make sense if you want to carry back losses. For question 8 about "Account Description," you simply need to identify where these trades occurred - like "Brokerage Account - TD Ameritrade" or "Trading Account - Interactive Brokers.

After struggling with Form 6781 for my options trading last year, I found an incredible tool called taxr.ai (https://taxr.ai) that literally saved me hours of frustration. I was in the exact same situation - switched from TurboTax online to desktop and got stuck with manually entering all my section 1256 contracts. The taxr.ai system automatically categorized all my trades correctly and figured out which elections made sense for my situation. It analyzed my SPX options trading history and actually recommended against making the Net section 1256 contracts loss election in my case because I didn't have enough prior gains to offset. Saved me from a potential audit flag!

Just wanted to update everyone - I tried out taxr.ai after seeing it mentioned here and wow! It actually worked really well for my section 1256 issues. I was skeptical at first (as you could probably tell from my question), but it correctly identified all my SPX options as section 1256 contracts and handled the mixed straddle situations I had perfectly. It even explained why I shouldn't make the net loss election this year since I didn't have enough gains in previous years to make it worthwhile. The account description thing turned out to be pretty straightforward too - I just listed each brokerage account separately. Definitely recommend checking it out if you're dealing with the same form 6781 headaches.

If you're having trouble with Form 6781 elections, you might want to try calling the IRS directly for guidance. I know that sounds ridiculous because getting through to the IRS is nearly impossible, but I used Claimyr (https://claimyr.com) and got connected to an actual IRS agent in under 15 minutes. They have this system that navigates all the IRS phone menus and waits on hold for you, then calls you when an agent is on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was surprisingly helpful about the election questions and explained exactly what I should put for the account description section based on my specific trading situation.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it myself because I was desperate for help with my Form 6781 issues. It actually worked exactly as described. I got through to an IRS tax specialist in about 12 minutes. The agent walked me through each of the elections on Form 6781 and explained that for my SPX options trading, I should only check the Net section 1256 contracts loss election if I had gains in previous years that I wanted to offset. For the account description in question 8, she said to simply put the name of my brokerage with "Options Trading Account" after it. Super straightforward once I had someone who could actually explain it. Definitely changed my mind about this service. Worth every penny to not sit on hold for hours.

Here's my understanding of the Form 6781 elections from someone who's been trading section 1256 contracts for years: The Net section 1256 contracts loss election is only useful if you had significant gains in prior years. It lets you go back and essentially "redo" prior year taxes using your current losses. For the account description, I just put "Primary Trading Account - [Brokerage Name]" and never had any issues with the IRS questioning it. One thing to note: make absolutely sure your SPX and VIX options are being properly classified as section 1256 contracts. TurboTax desktop sometimes misclassifies them if you're not careful during import.

Anyone know if box spreads on SPX options still qualify for section 1256 treatment? I've been using them for pseudo-financing and I'm not sure if I should be checking any of these elections for tax purposes.

I've been dealing with Form 6781 for my options trading for the past few years, and I totally feel your pain about the desktop vs. online TurboTax issue. The desktop version definitely requires more manual work for section 1256 contracts. A few quick tips that might help: 1. Double-check that your SPX and VIX options are actually being treated as section 1256 contracts in the desktop version. Sometimes the import doesn't categorize them correctly and they end up on Form 8949 instead of Form 6781. 2. For the "Net section 1256 contracts loss election" - only select this if you had significant section 1256 gains in the previous 3 years that you want to offset. If you didn't have prior gains, this election won't benefit you and your losses will just carry forward normally. 3. The account description can be pretty straightforward. I usually put something like "Options Trading Account - [Broker Name]" and have never had issues with the IRS. 4. If you're really stuck, consider reaching out to a tax professional who specializes in trading taxes. The cost might be worth it for the peace of mind, especially if you're dealing with complex positions or significant amounts. The learning curve is definitely steep when switching from the online version, but once you get the hang of it, the desktop version does give you more control over how everything is categorized.