When the markets whipsaw, and you are on the wrong side of every move, you may feel unworthy of the moniker “trader.” But even at your most profitable, the IRS might concur that you can only claim to “play a trader on TV.”

There is a blurred distinction between the definitions of trader and investor. In order to enjoy the tax benefits of a trader, you have to qualify as a trader first. Even people who trade three to four times a week are considered investors by the IRS. The tax man doesn’t care if you have a multiple monitor setup, high blood pressure, and know every conversational and sartorial nuance of the folks on CNBC and Bloomberg. The IRS says you are a trader only if you buy and sell stocks almost every working day.

Still, even those who qualify as business traders fail to maximize their tax savings. Part of the problem is that too many accountants still do not know these breaks, or the many nuances and pitfalls that accompany them. Business traders are entitled to several tax breaks, whereas investors get the IRS shaft. By default, the IRS lumps all traders into the category of “investor tax status” and investors get penalized in the tax code, with restricted investment interest and investment expenses, capital loss limitations ($3,000 per year), wash-sale loss deferrals, no retirement plans and more.

In order to qualify for these tax breaks, business traders must first learn these (mostly) unpublicized rules, navigate around the vague yet strict business-qualification requirements, make certain tax elections on time, and then execute all the strategies properly on their tax return. So the burden is on you, the taxpayer, to get what you are entitled to.

So how can traders get a financial leg up this tax season? Take advantage of your IRA.

Traders can actively trade a retirement plan on a tax-free basis, building up cumulative tax-free returns until retirement distributions are taken out. With a Roth IRA, those tax savings become permanently tax-free.

It benefits traders, and really anyone looking to build wealth, to max out your IRA contribution. You can contribute up to $5,500 tax-free to a traditional IRA in tax-year 2014. That jumps to $6,500 if you are age 50 or older because, at that age, investors can take advantage of the $1,000 IRA catch-up contribution.

So avoid the temptation of spending the money Uncle Sam sends back your way, and instead have your federal refund directly deposited into an account with a bank or other financial institution. The refund can be split into multiple (up to three) accounts, including IRAs. Taxpayers electing to direct deposit their federal income tax refund will use either IRS Form 1040, if directing to only one account, or IRS Form 8888, if splitting a refund between two or three different accounts.

Give yourself a head start on retirement savings for the year, so you can max out your contributions, as this is paramount for traders looking to maximize their tax savings and build wealth over time.

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