Look for more info on this on greentradertax.com, they have a lot of (free) articles on how this type of thing works.
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Declaing yourself as a DAYTRADER taxes!
- Thread starter Sky123987
- Start date
Some tax accountants don't understand the wash sale rule correctly. They think that you just wipe out losses from a wash sale.
However, the correct way is this: You buy a stock, then sell it, then buy it back again, then sell it again. The loss is added to the basis of the next purchase. Eventually you will realize that loss on the last sale. There are software programs that help you do this. It will be very difficult manually if you trade thousands of times per year.
However, the correct way is this: You buy a stock, then sell it, then buy it back again, then sell it again. The loss is added to the basis of the next purchase. Eventually you will realize that loss on the last sale. There are software programs that help you do this. It will be very difficult manually if you trade thousands of times per year.
Remember that buy paying SE tax you can contribute to a solo-k up to $50,000 a year and deduct that against your income. This is the route I have gone the last few years. When I was using mark to market my only choices were an ira which the contribution is small and an annuity which you don't get the deduction. Anyone who is knowledgable on this subject please comment.
Yes it will be extremely difficult to calculate those wash sales if you have thousands of trades. But you won't even need to bother, if you make sure to stop trading the stock(s) that you had wash sales for during a 30 day period that overlaps the end of the year. If you make sure to do that, then not doing the calculations yields the same end result as doing the calculations.Quote from RiceRocket:
Some tax accountants don't understand the wash sale rule correctly. They think that you just wipe out losses from a wash sale.
However, the correct way is this: You buy a stock, then sell it, then buy it back again, then sell it again. The loss is added to the basis of the next purchase. Eventually you will realize that loss on the last sale. There are software programs that help you do this. It will be very difficult manually if you trade thousands of times per year.
Quote from dumpandbasher:
Yes it will be extremely difficult to calculate those wash sales if you have thousands of trades. But you won't even need to bother, if you make sure to stop trading the stock(s) that you had wash sales for during a 30 day period that overlaps the end of the year. If you make sure to do that, then not doing the calculations yields the same end result as doing the calculations.
This is correct. I suggest you read Capital Gains Minimal Taxes it explains wash sales in detail and how to avoid problems.
That seems a little strange. The wash sale rule says that if you sell a security at a loss and purchase a substantially identical security within 30 days you cannot claim the initial loss at the time of the sale. You must adjust the basis of the replacement security (add the loss to the cost of the replacement). For tax purposes this raises the cost of the repurchased security. If you sold the repurchased security for a profit based on the adjusted basis that ends the wash sale adjustment. If you sold at a loss and again repurchased within 30 days the basis gets adjusted upwards again. If you were day trading, unless you lost money on all of the subsequent transactions, you should have reached the point where the issue was closed out for either a profit or a loss and not repurchased within 30 days. The only way you should owe money is if you were in a "wash" position over the end of a tax year. Short sales complicate things but the rule still applies.Quote from Sky123987:
I have a whole TON of taxes that I owe because of this WASH rule.
I'd carefully review the Schedule D the accountant has prepared to ensure it was handled correctly. I assume you are about to file your 2007 return. You've got until tomorrow afternoon to get things fixed. If your accountant is handling a bunch of Oct 15th extension filings and cannot fix what I hope isan error in your favor you'll just have to file an amended return,
Jack
Quote from jd7419:
Remember that buy paying SE tax you can contribute to a solo-k up to $50,000 a year and deduct that against your income. This is the route I have gone the last few years. When I was using mark to market my only choices were an ira which the contribution is small and an annuity which you don't get the deduction. Anyone who is knowledgable on this subject please comment.
seems like a good suggestion. i would not mind hearing from others who went this route.