This is specifically for NYS. In 2018 I made the sec 475 election with the IRS, which is basically trader tax status on my federal return.
I did this for a huge trading loss in 2018, and since I felt like I met the requirements as a trader I elected the trader tax status (sec 475 election)to be able to use my losses against W2 income. I have a $500,000 NOL from that year.
The IRS has not given me any issues yet about me making this election or using my NOL in 2019 and 2020.
However, I just got notified that for my NYS 2020 return, NYS is requesting information about my losses and has not issued the refund. I'm in audit status on their webpage. I won't know for another week exactly what they are requesting about my losses.
My question is, could NYS decide to say I can't use the Trader Tax Status from 2018, if the IRS has not revoked this status or questioned me about it?
Should I worry about defending my Trader Tax Status to NYS?
Do you think NYS is most likely requesting my individual stock transactions? They have never bothered me before about this and I have always combined them together in the past.
I have not listed my individual stock transactions on my return. For simplicity I lumped them together, and it is possible they may want all my individual trades. Which is fine, because I can just send them the detailed stock transactions.
Thanks, I'm just a little worried about being under audit here as I never have been before. I also have this sec 475 election and am worried about defending if I'm a trader or just an investor. I am also not sure if trader status is decided with the IRS or can a state decide If I'm a trader or not.