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

Form 6781 can definitely be confusing if you're dealing with section 1256 contracts like SPX and VIX options for the first time! Let me break down those election checkboxes for you: 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 gains in prior years and want to reduce previous tax liability. Only check this if you actually have a net loss for the current year and want to carry it back. The "Mixed straddle election" applies if you're combining section 1256 contracts with non-section 1256 positions in a straddle strategy. "Mixed straddle account election" is for traders who consistently use mixed straddles and want to maintain a separate account for them. "Straddle-by-straddle identification election" lets you identify specific positions as part of a mixed straddle. For question 8 (Account Description), simply enter the name of your brokerage where you hold these investments, like "Fidelity Account" or "TD Ameritrade Options Trading Account.

After struggling with similar section 1256 reporting issues in TurboTax, I discovered taxr.ai (https://taxr.ai) and it was a game-changer for my options trading. I was manually entering tons of SPX trades and constantly worrying about whether I was selecting the right elections on Form 6781. With taxr.ai, I just uploaded my trading statements and it automatically categorized my section 1256 contracts, determined the correct elections, and provided the completed form entries. It even explained why certain elections would or wouldn't benefit my specific tax situation based on my trading history. The best part was that it showed me exactly what to enter in TurboTax to get the right 60/40 split and handled all the mark-to-market calculations that I was previously doing manually.

I was originally skeptical about using taxr.ai for my section 1256 reporting, but I'm glad I gave it a try. After spending hours trying to figure out the Form 6781 elections for my SPX options, I uploaded my statements to taxr.ai and it immediately identified that I shouldn't be checking any elections this year. The tool actually showed me that the "Net section 1256 contracts loss election" would have been disadvantageous in my case because my previous years' rates were lower than my current rate. I would have checked that box incorrectly without understanding the implications. It also properly calculated my 60/40 split and explained exactly what to enter in each field of Form 6781, including the account description. Saved me hours of research and potentially costly mistakes with the IRS.

For anyone struggling with section 1256 reporting on options trades, I had a similar issue and couldn't get answers from TurboTax support. After multiple failed attempts to reach someone knowledgeable at the IRS about Form 6781 elections (kept getting disconnected or waiting forever), I tried Claimyr (https://claimyr.com) and was actually able to speak with an IRS tax specialist. They have this service where they navigate the IRS phone system for you and call you back when they reach a real person. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified that for typical SPX options traders, you generally don't need to check any of the election boxes unless you have a specific tax strategy involving loss carrybacks or straddles. She also confirmed that for question 8, simply listing your brokerage account is sufficient.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate for answers about the mixed straddle election for my complicated options strategy. Not only did I get through to the IRS (which I've failed to do on my own for weeks), but I was connected to someone in their specialized tax forms department who actually understood section 1256 contracts and Form 6781. She explained that my particular trading strategy with both SPX and equity options would benefit from the straddle-by-straddle identification election, not the general mixed straddle election I was planning to use. This likely saved me thousands in taxes because I was about to make an election that would have been disadvantageous for my specific situation. Worth every penny for the time saved alone, not to mention the tax savings.

For question 8 on Form 6781 (Account Description), I've been trading section 1256 contracts for years and always just put something like "Brokerage - Options Trading" or specifically name the account like "TD Ameritrade Options". The IRS just needs this for identification purposes if they need to match up your reporting with the brokerage's reporting. More importantly though, make sure you understand the mark-to-market rules for section 1256 contracts. Remember that even if you didn't sell your SPX or VIX options by year-end, you still have to report them as if they were sold on December 31st at fair market value. This trips up a lot of traders their first time dealing with these contracts.

Does anyone know if the "Mixed straddle election" is permanent? Like if I check that box this year, am I stuck with that choice forever? I'm doing some SPX options along with SPY options and trying to figure out if this counts as a mixed straddle situation.

I've been dealing with Form 6781 for my SPX trading for a few years now, and I totally understand your frustration with the desktop version. Here's what I've learned: For those checkboxes, you're overthinking it - if you're just doing standard SPX and VIX options trading without any complex strategies, you probably don't need to check ANY of the boxes. The normal 60/40 tax treatment (60% long-term, 40% short-term) happens automatically for section 1256 contracts without any elections. Only check "Net section 1256 contracts loss election" if you have losses this year AND you want to carry them back to offset gains from the previous 3 years. This requires amending prior returns, so it's only worth it if you had significant gains in those years. For question 8, I just put "Interactive Brokers Options Account" or whatever your actual brokerage is called. Keep it simple. Pro tip: Make sure you're capturing all your section 1256 positions at year-end market value, even the ones you're still holding. The mark-to-market rules mean you report unrealized gains/losses too, which a lot of first-timers miss.