Here's an excerpt from an article on taxes on day trading from Smart Money magazine:

DO YOU TRADE STOCKS more often than most people change their socks? Then you need to understand how Uncle Sam views your habit. Otherwise, come April 15, you'll be suddenly confronted with a mountain of paperwork. And those profits? Well, they'll seem a lot smaller once the Internal Revenue Service has taken its share.

There are, however, some strategies that active investors can use to reduce their tax bills — and make life much more pleasant come tax season. Here's what you need to know about them.

Trader vs. Investor

In the world of taxes, "trader" and "investor" each has a special meaning that carries with it some pluses and minuses. Most individuals — even those who trade a few times a week — are, by the IRS's definition, investors. But if you spend your days buying and selling stocks like a hedge fund manager, then you are probably a trader, a title that can save you big bucks at tax time. How? By allowing you to fully deduct all your investing expenses, such as newsletter subscriptions, your home office and your computer equipment.

So what are you, you ask, a trader or an investor? This is one of the fuzziest areas of our fuzzy tax code. "The question is clear; the answer is not," says an IRS spokesman. The only way to define your status is to go by the guidelines laid out in several court cases that have addressed the question.

The courts say you are a trader if:

· You spend lots of time trading. Preferably, you don't have a regular full-time job. (My reading is, you can also be a part-time trader, but you had better be buying and selling a handful of stocks just about every day.)
· You have established a regular and continuous pattern of making lots of trades (several almost every day the markets are open).
· Your goal is to profit from short-term market swings rather than from long-term gains or dividend income.

If you think you qualify and want to know the nitty-gritty of the rules, see More Tax Tips for Day Traders. If you're not so sure, here's how I think these court cases apply to the real world. Say you spend 10 hours a week trading and total about 200 sales a year, all within a few days of your purchase. In my book, you're an investor, not a trader. You are not spending enough time or trading often enough to satisfy the IRS. How about 20 hours a week and 1,000 short-term trades? I think that amount of time and trading gets you there. If you spend 30 hours a week, make 5,000 short-term trades a year and don't have a full-time job, even the IRS should agree without a fight. If you choose, you can actually be both a trader and an investor. You must segregate your long-term holdings by identifying them as such in your records on the day you buy in. Then they won't "taint" your trader status.

For advice that pertains to your particular situation, and many more services exclusively for day traders, trust the day trading tax experts at tradersaccounting.com.

McCain's 'No new taxes' redux

According to an article on income taxes on dallasnews.com, has made the same promise that George Bush 41 made in 1988: “No new taxes”…

As he received former President George H.W. Bush's endorsement in Houston, John McCain noted that they had two things in common: Both were naval pilots, and both were shot down.
A day earlier, however, the presumptive Republican nominee added a third similarity, when he echoed Mr. Bush's most ill-fated 1988 campaign promise: "No new taxes."

On ABC's This Week with George Stephanopoulos, Mr. McCain pledged that under "no" circumstances would he increase taxes. He reiterated his support to make permanent the 2001 Bush tax cuts he once opposed, adding that he'd also like to eliminate the Alternate Minimum Tax.

It's a multibillion-dollar promise that Mr. McCain could rue if he wins the White House – and one more example of how appeals to various groups in primary campaigns can create problems down the road for a winning candidate.

The problem is not confined to the Republicans. Barack Obama and Hillary Clinton have promised to increase federal programs beyond what they may be able to deliver. Mr. Obama also says he'd withdraw all U.S. combat troops from Iraq within 16 months.

According to the Center on Budget and Policy Priorities, a liberal think tank, making permanent both the Bush tax cuts and the AMT fix would cost the government $3.6 trillion in revenues over the next decade. Repealing the AMT would cost even more.

Upper-income taxpayers would be prime beneficiaries of both moves.

A recent NBC-Wall Street Journal poll showed those surveyed evenly split on the economic merit of tax cuts. In an Associated Press/Ipsos poll, respondents put tax cuts below pulling out of Iraq and increasing federal domestic spending when asked what would help fix the economy significantly.

Reciting the tax-cut mantra may help Mr. McCain overcome some GOP doubts about his fealty to conservative principles, but it could cause him grief if he wins.

Wouldn't it be nice if you could expense a fixed asset at one time?

That's exactly what a Section 179 deduction lets you do.

Back in the day, a Section 179 deduction was limited to $25,000. But changes in the tax law have increased how much you can write off. Lawmakers increased the Section 179 deduction amount to stimulate the economy

For purchases made in 2008, your small business can expense $250,000 in capital expenditures. As we move into 2009 and beyond, those numbers are increasing, due to some inflation indexing.

You have to opt-in to take a Section 179 deduction. It isn't automatic. You make the election on an item-by-item basis using Form 4562.

Unfortunately, you cannot apply the Section 179 deduction to purchases you've made in prior years. The Section 179 election has to be made in the tax year the property is first placed in service.

If you don't use your entire Section 179 deduction this year, you can't rollover the excess to next year. It's a use-it-or-lose-it small business tax deduction.

If you do hit the maximum Section 179 deduction amount, any overage for a purchase must be depreciated. In addition, you cannot deduct more than your income - in other words, you cannot use Section 179 to create a taxable loss.

Economic Stimulus Payments

The United States Treasury is gearing up to send economic stimulus payments to more than 130 million taxpayers starting in May of 2008. These payments are part of a congressional effort to bolster a sinking economy. In order to receive a check most taxpayers need only to file their 2007 tax returns.

The amount of the payment depends on the taxpayer’s general tax situation. In most cases the payment will equal the amount of tax liability shown on the 2007 Income Tax Return. The maximum amount of the payment will be $600 for individuals and $1200 for taxpayers filing joint returns. The minimum amount of the payment will be $300 for individuals and $600 for joint filers. Taxpayer’s who have children who are eligible for the child tax credit will receive an additional $300 for each qualifying child. These amounts will be phased out for high-income taxpayers.

Rebate, Redux, Reflux

Here’s an excerpt from a Forbes.com article on the recently approved tax rebates.

It sounds simple. The economic stimulus package President George W. Bush signed today requires the U.S. Treasury Department to send "tax rebates" of $300, $600, $1,200 (or more, if the recipient has kids) to 128 million American households.

The checks will start going out in May. The $100 billion-plus cost will be added to the deficit, and we (or our children) will pay for it later--with interest.

Except these checks aren't rebates, exactly. And nothing about them is simple. The rebate is technically a credit against your 2008 tax bill that is being paid (in most cases) as what we'll call a "prebate." This prebate is based on your 2007 income tax return. The actual credit is based on your 2008 tax return. Whichever year produces the bigger check for your family

To complicate matters further, there are not just two tax years, but three different types of credits involved. Plus, all three credits are denied to folks who earn too much--with the benefit starting to phase out at $75,000 adjusted gross income for an individual and $150,000 for a couple. The $75,000 threshold also applies to single parents filing as heads of household.

Given such complications, it's not surprising that tax advisers have been brainstorming how families can get the greatest possible stimulus benefits by managing their 2008 (or even, in some cases, 2007) taxable incomes.

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Senate passes economic plan and sends to House

WASHINGTON (Reuters) - The U.S. Senate on Thursday passed an economic stimulus plan that would send government rebate checks to millions of Americans including retirees and disabled veterans to help lift the economy and stave off an election-year recession.

The Senate voted 81-16 in favor of the package, which will provide one-time rebates of up to $600 for individuals or $1,200 for couples plus $300 for each child. Low income people, including retirees on Social Security and disabled veterans who pay no income taxes, would receive checks of $300.

The checks could be in the mail within months.

The House of Representatives is expected to also vote on the package on Thursday and send it to President George W. Bush for his signature.

The Senate overwhelmingly agreed to the measure, which would inject more than $150 billion into the economy this year, after Republicans on Wednesday blocked a broader bill that would have provided more tax breaks for businesses and benefits for long-term unemployed people.

H.R. 3970: Change is in the Wind.

There is a new bill causing a stir in many circles. The bill is “H.R. 3970 Tax Reduction and Reform Act of 2007.” One change the bill calls for is the repeal of the Alternative Minimum Tax. To many individuals this is good news, which will result in a lower tax bill. However, as we have seen in the past congress doesn’t give without taking. In addition to the repeal of the AMT the bill is also calling for a 4% to 4.6% replacement tax for individuals earning over $500,000 ($250,000 for single taxpayers).

Repealing AMT is just one of the many facets of this bill. There are numerous other changes the bill proposes which will help and hurt depending on your tax situation.

McCain, Romney and the Bush Tax Cut

Arizona Sen. John McCain and former Massachusetts governor Mitt Romney’s debated their positions on the Bush tax cut Wednesday night in California, less than a week before the Super Tuesday contests that could decide the GOP nomination.

Here are the facts about their positions on the Bush tax cut, according to an article on USAToday.com:

The claim: Romney criticized McCain during the debate for voting against tax cuts backed by President Bush and passed by Congress in 2001 and 2003.

The facts: McCain did vote against both tax bills, saying Bush's plan cut taxes too much for the wealthy and not enough for everyone else. "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans who most need tax relief," McCain said in 2001.

During debate in 2004 on a different, smaller tax cut package that he supported, McCain said: "I support extending this tax relief to American families, but we have got to wake up and take a long, hard look at how we are going to pay for all of this." He has since voted to make the Bush tax cuts permanent.

As governor, Romney opposed broad-based tax hikes but signed legislation closing what he called corporate tax "loopholes" that resulted in some businesses paying more taxes. Romney also raised some fees for state services. During the debate, McCain said Romney had raised fees by $730 million, while Romney said the total was $240 million.