Tax Tips for Procrastinators

Editor's note: As a special feature for March, TheStreet.com is offering an ongoing series on everything you need to know about taxes. Today is Part 17.

We seem to have piqued your interest when we tackled filing as a trader in the eyes of the IRS (check out this previous story for all the grist). We have several follow-up questions, and we'll address some of them today.

We'll also proffer some last-minute tax tips, since your 2006 tax return is due by midnight on April 17. So let's get going!

Some Tricky Trader Queries

Q: If I am using funds in an IRA for all of my trading, can I be considered a trader?

As far as the Internal Revenue Service is concerned, saving for your own retirement is not a business.

If you claim trader status, you're risking the tax-deferred status of your retirement account, because you're saying that it's your business. Granted, there are no court decisions in this area, but this is the current belief at the IRS.

The root of your problem is that your income is not taxed as it is earned in your retirement account. It is taxed as it's taken out. So, sure, the IRS will get its share, but not as a direct result of your trading activity.

As for your trading costs, you can try asking your broker to charge those miscellaneous fees directly to your IRA account so you don't have to withdraw money to pay them. If your broker refuses, you can always write off those expenses as itemized deductions on your tax return.