The Internal Revenue Service finally released instructions this week on how to make the mark-to-market election, a key tax decision for frequent traders.

Traders can elect to

mark to market trades, reporting all income and expenses on

Schedule C

-- Profit or Loss from Business

. Proposed

regulations issued in January require that the election be made by April 15. Previously, the election could be made at any point in the year.

But the IRS gave no instructions on how to make the election. In response to this ambiguity, the agency on Tuesday issued a revenue procedure,

Rev. Proc. 99-17

, detailing the steps.

Traders making the mark-to-market election for trades made in 1998 must attach a statement with their federal tax returns, declaring they are making the election under

Section 475(f)

of the tax code for the 1998 tax year, which began Jan. 1, 1998. The statement should not be attached to any 1998 extensions, just the return itself. It also must state that the election is being used for the business of trading in securities or commodities.

The IRS anticipates a declaration form will be available in the future.

To make the election for the 1999 tax year, a similar statement must be filed by April 15. That means attaching the statement to either the federal tax return or an extension.

Once traders make the election, they are stuck with it. Reporting gains and losses on

Schedule D

-- Capital Gains and Losses

won't be allowed without the IRS' permission after that.

And it is all the more important that traders who make the election keep their long-term securities separate from their trading activities. If any security is left unidentified, it may automatically be subject to the mark-to-market rules.

The IRS Finds E-File Partners

To promote the electronic filing of tax returns, the IRS has created partnerships with 10 private-sector firms that are offering services that are "above and beyond the call," says IRS spokesman Bob Barr.

These services range from allowing active military personnel to prepare and file their returns for free, offered by

SecureTax, to allowing free e-filing for taxpayers whose adjusted gross incomes are below $20,000, offered by



There are 18

companies authorized by the IRS to submit tax returns electronically. The 10 partners were chosen from among this group after the IRS approached them and asked, "OK now, what can you do for us and what can we do for you?" says Barr, the IRS' assistant commissioner for electronic tax administration.

The 10 partners are listed on the IRS'

Web site in order of the value of the services they offer, in the IRS' estimation.

The IRS hopes to receive electronically 80% of all tax returns filed by 2007. This year, more than 10 million taxpayers have e-filed as of Feb. 11.


will publish a guide to e-filing sites and programs next week.

TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.