DAY TRADERS and other frequent traders-

FREQUENT TRADER TAX HEADACHES and how to avoid them.

If you are a frequent trader, mutual funds hate you and brokerage companies love you.

Either way, the IRS might make life miserable when tax time rolls around and you have to report a zillion transactions on your Schedule D.

I try to avoid the tax hassle by doing almost all my trades in a Rollover IRA account. The only thing I have to report is what I withdraw which is fully taxable as ordinary income.

Outside the IRA, to keep my taxes simple, I invest mostly in Closed-end funds which are invested in tax-exempt bonds. I only have to report the interest on line 8a of my Form 1040. Even though it is tax exempt, it can affect how much of your social security is taxable (which is a sneaky way to tax your tax-exempt income). You may have to pay tax on 50% to 85% of our social security even if you have no tax-exempt interest.

For a look at some tax-free high yield CEFs check http://www.successful-investment.com/StatSheet/SS011107.htm . The tax-exempt CEFs are item 4b in the index and appear near the end of the list of various funds covered by this publication. Discounts and premiums over net asset values and yield rates are shown.

LINKS and References – go to

IRS References

Contact me at taxxcpa2007@hotmail.com

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This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.