Filing tax return as day trader

Quote from bighitter1:

trader satus so you honestly think the irs will audit a 5 year mtm traders who's consitently done 1 billion a year of 1099 sales and has no other income?the answer is a resonding no. i've talked to many trader accountants in the past few years and all said there audit rates are miniscule to almost zero outside outrageous nol loses are a sudden mtm election with big loses. the irs knows 95% of small businesses lie like crap but they audit maybe 1%. and all traders info is sent to the irs were a small business is dealing with cash and many other things
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It is not as if traderstatus was spreading information from a questionable source. The data he provided was from the IRS web site.
You have some interesting theories about how and when the IRS selects taxpayers for audit. You need to wake up and realize that the IRS has uninhibited authority to assess and collect taxes. It may be something completely innocuous that draws their attention to your return. When they find that you have not met their reporting requirements after they have given specific notice to taxpayers, what do you suppose they might do? I submit to you that a taxpayer that complies with reporting requirements is less likely to be audited than one that does not.

-segv
 
Quote from bighitter1:

the irs has no interest in seeing a 2000 page d-1 period.
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The IRS could have stated that they did not need to see every transaction from mtm traders, traders whose d-1s would be over 1000 pages, or whatever threshold they chose to enforce. They did not (I wish they had).

Instead, in their three-month-old update titled "IRS Clarifies Schedule D Instructions for 2005" (traderstatus provided the link), they stated that traders and investors must include each transaction. You are invited to "Use as many Schedules D-1 as you need". Curiously, the IRS seems to say you are unlikely to be penalized if you fail to comply "Generally, a tax return that is accurately and timely filed, with the correct amount of tax paid, is not penalized."

Seems contradictory. Could it be that traderstatus is right regarding the letter of the law (fairly clear if you ask me) and bighitter is right regarding the spirit of the law?
 
no i agree the letter of the law says to file a d-1 no matter if you have 1 or 1 million trades. but i also say in years past the irs could have asked any trader for a breakdown if they wanted. the law has not changed for 5 years ago they're just reminding people what it is. why they've asked is anyone's interpretation but i'm willing to bet anything it's because of the mass abuse of none full time traders. hence they want to see the breakdown in trades to make sure people who file a sch c are trading consistently and daily and no sporatically like 1 day heavy then not for 3 weeks. i say it's almost impossible to do a d-1 with 5 different brokers and 1 milllion trades. especially if one scales ina nd out and holds some positions for days or even overnight. thats why the one line is the most accurate taking one's balance on jan1 and dec 31st and deducting out interest and adding back in withdrawels. no positions on jan 1 nor any on dec 31st. WHAT DOES A LLC DO WHO HAS 10 TRADERS UNDER HIM DO. HE ISSUES A K-1 TO ALL HIS TRADERS. HIS WHOLE LLC HAS 2 MILLION TRADES. DO YOU THINK HE'LL DO A D-1 ON HIS LCC FOR 5000 PAGES? GET REAL
 
Quote from range:Could it be that traderstatus is right regarding the letter of the law (fairly clear if you ask me)
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The fact is the IRS does get thousands of individual trades reported, or millions of trades for that matter. All one has to do is look at their form 1099-B (which is sent to the IRS every February) to see how insincere any claims are - that the IRS does not want to get this type of information.

for your reading enjoyment
http://xml.coverpages.org/irs.html
companies the page count can run into the thousands.

http://72.14.203.104/search?q=cache...e+income+tax+return&hl=en&gl=us&ct=clnk&cd=13
Enhancing the outdated, proprietary IRS technology has been a massive undertaking, not without delays and challenges. The earlier electronic filing system did not allow e-filing of corporate tax returns, was not designed to accept returns from large companies (often more than 50,000 pages in length)

http://tax.aicpa.org/Resources/Indi...S+to+Eliminate+Scedule+D+Reporting+Burden.htm
AICPA Urges IRS to Eliminate Scedule D Reporting Burden

http://www.ustreas.gov/tigta/auditreports/2003reports/200330123fr.html
Large corporate returns, however, can contain thousands of items and thousands of pages.

http://www.aicpa.org/PUBS/jofa/dec2004/dumars.htm
A truck pulls into an Internal Revenue Service processing center with a special delivery. The cargo isn’t thousands of individual tax returns; it’s a single, massive form 1120 corporate tax return.
 
I'm just not going to list every transaction. I'm gonna post share totals, purchase totals, and sales totals for each retail broker. I don't have the information in the format the IRS demands and it would take me at least 10 hours to put it all the info on an excel file in the format they want. It's unbelievable, in fairness I'd like the the IRS to ask Walmart and every other retail operation to account for each one of their transactions too (the IRS would get trillions of pages). I don't care if I get audited, its not like I'm lying and let them waste resources. I guess I'm advocating a little bit of civil disobediance. I'm also never going to e-file - whatever makes life harder for them to confiscate income/savings.
Besides my broker has already sent them total sales information anyway. And here's a suggestion for brokers who have millions of customers that have to spent billions of hours putting the data together in a way that satisfies the IRS: simply provide the data to your customers in the format the IRS demands. I'll post this in the IB suggestions thread.
 
could'nt brokers offer software similar to the irs forms and record the info there each time you close a position. i'd pay 10$ mth to use it. at tax time i'd simply download it and send it to the taxman.
 
trader status i'm out there with 5-10 brokers every day and i jsut don't think you're in reality. for one 1000's of trader son here use ib. IB DOESN'T EVEN SEND AN ITEMIZED 1099 B WITH EVERY TRADE TO THE IRS. THEY SEND A CONSOLIDATED 1099 WITH YOUR TOTAL SALES FIGURE THATS IT. I CALLED AND ASKED THEM WAIT WERE'S MY SALES AND THEY SAID GO TO THE ANNUAL STATEMENT THAT JUMBLES EVERY TRADE WEHTER FUTURES OPTIONS OR STOCKS IN A CRAZY UNORGANZIED FORMAT. IF ALL THIS IS SO IMPORTANT HOW COME IB GETS AWAY WITH IT
 
Quote from reid5525:could'nt brokers offer software similar to the irs forms and record the info there each time you close a position. i'd pay 10$ mth to use it. at tax time i'd simply download it and send it to the taxman.
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Many brokers already do, and it gets better each year. Ameritrade is one of the best, IMO, as you can run the trade matching reports in numerous formats: with wash sales for regaular reporting, or without wash sales for you M2M traders. Plus, as required by IRS, they produce separate reports for the year-end Sec 475 M2M and Sec 481 calculations... And numerous other reports for non-tax analysis too!

For my clients who have AMTD Apex I often log in (with a temp password) and just run the reports myself for their tax complaince.
 
trader status if the irs IS so serious and "takes the time to get brokers to send them a 1099". THEN HOW THE HELL COME I CAN MAKE 25K OPTION TRADES AND NOT ONE TRADE IS EVER SENT TO IRS. HOW MANY PEOPLE ARE CHEATING THE IRS OUT OF BILLIONS BY NOT REPORTING THERE OPTION TRADES?
 
Whats with e-file anyway? Why can't you e-file directly with the IRS? Why do you have to file thru a CPA or CPA firm - many of whom charge fees? Besides I would have privacy concerns too filing thru someone or a firm I didn't know.
 
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