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New IRS schedule D requirements
- Thread starter kowboy
- Start date
Line 2 brings over the total amount of sales and net short-term gain/loss from your stock sales listed on all of your separate Schedule D-1 forms.Quote from trader99:I got a question on the Sch. D. If you traded stocks, futures, and options what do you put on line 2 and 3?
Futures usually end up on Sch D line #4 & line #11 after going through form 6781.
Quote from traderstatus:
Line 2 brings over the total amount of sales and net short-term gain/loss from your stock sales listed on all of your separate Schedule D-1 forms.
Futures usually end up on Sch D line #4 & line #11 after going through form 6781.
tradestatus,
So, do i need to print out a D-1? Or can I just submit tonsof trades from TraderLog? I thought that was sufficient.
Also, in line #4, there's a form called 6781. It deals with futures. Do I need to submit that?
Or can I just commingle all the losses into line 1 and say see attached page?
IRS 1099 matching program expects to see you report on form 6781. As to the presentation on your personal tax return, that depends on your own unique situation.Quote from trader99:traderstatus,
So, should I segregate my futures into 6781? and the stocks trades into Line1 of Schd?
Or can I commingle them all together in line 1 and add up the total losses?
The AICPA website has just provided this link to the latest IRS clarification of Sch D. I have one question: How is a volume trader to supply the details of thousands of trades in a format similar to sch D in a practical manner? For example, 10,000 trades entered on an 81/2"x11" sheet with 12 point type at 45 lines per page gives 222 pages of attachments to sch D. Not to mention the time involved required to copy and pasting of the trades from the broker statements into the accounting software. Any suggestions?
http://www.irs.gov/formspubs/article/0,,id=109875,00.html
Notice â Clarification of the 2005 Instructions for Schedule D (Form 1040)
The IRS has received many inquiries about a new instruction that was added on page D-6 of the 2005 Schedule D instructions for completing lines 1 and 8. The new instruction states:
"You must enter the details of each transaction on a separate line. If you have more than five transactions to report on line 1 or line 8, report the additional transactions on Schedule D-1. Use as many Schedules D-1 as you need. Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Do not enter "see attached" and summary totals from an attachment in lieu of reporting the details of each transaction directly on Schedule D or D-1."
However, on page D-3 of the 2005 Schedule D instructions, the instructions for "Traders in Securities" state:
"Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of the securities) on Schedule D or D-1 or on an attached statement containing all the same information for each sale in a similar format."
The instructions on page D-3 for traders (and investors) have been unchanged since the year 2000. The new instructions on page D-6 were meant to highlight and clarify these rules, not to change them. Therefore, taxpayers may continue to use a substitute statement to provide all of the same information and in a similar format to lines 1 and 8 of Schedules D and D-1. They are not required to use the official version of Schedules D and D-1 to provide the details on each transaction. However, the details of each transaction still must be provided with the tax return and not just upon request.
The 2005 Instructions for Schedule D (Form 1040) is now available for download ( PDF version) or for viewing online ( HTML version). -- 09-JAN-2006
http://www.irs.gov/formspubs/article/0,,id=109875,00.html
Notice â Clarification of the 2005 Instructions for Schedule D (Form 1040)
The IRS has received many inquiries about a new instruction that was added on page D-6 of the 2005 Schedule D instructions for completing lines 1 and 8. The new instruction states:
"You must enter the details of each transaction on a separate line. If you have more than five transactions to report on line 1 or line 8, report the additional transactions on Schedule D-1. Use as many Schedules D-1 as you need. Enter on Schedule D, lines 2 and 9, the combined totals from all your Schedules D-1. Do not enter "see attached" and summary totals from an attachment in lieu of reporting the details of each transaction directly on Schedule D or D-1."
However, on page D-3 of the 2005 Schedule D instructions, the instructions for "Traders in Securities" state:
"Like an investor, a trader must report each sale of securities (taking into account commissions and any other costs of acquiring or disposing of the securities) on Schedule D or D-1 or on an attached statement containing all the same information for each sale in a similar format."
The instructions on page D-3 for traders (and investors) have been unchanged since the year 2000. The new instructions on page D-6 were meant to highlight and clarify these rules, not to change them. Therefore, taxpayers may continue to use a substitute statement to provide all of the same information and in a similar format to lines 1 and 8 of Schedules D and D-1. They are not required to use the official version of Schedules D and D-1 to provide the details on each transaction. However, the details of each transaction still must be provided with the tax return and not just upon request.
The 2005 Instructions for Schedule D (Form 1040) is now available for download ( PDF version) or for viewing online ( HTML version). -- 09-JAN-2006
10,000 separate transactions is certainly an extremely unique situation. On the other hand 222 pages have a paper cost of about $3.00 at the local Staples Store, and maybe another $10.00 for ink and postage. So presuming that small effort is not your concern, that leaves the brokerage information being submitted to IRS as the issue.Quote from kowboy:How is a volume trader to supply the details of thousands of trades in a format similar to sch D in a practical manner? For example, 10,000 trades entered on an 81/2"x11" sheet with 12 point type at 45 lines per page gives 222 pages of attachments to sch D. Not to mention the time involved required to copy and pasting of the trades from the broker statements into the accounting software. Any suggestions?
Many brokers already provide matching in a Sch D-like format or they offer a download into Excel, or Quicken for Sch D formatting. Other brokers provide paper reports to customers already formatted and providing all of the Schedule D information.
But, if you do not do this level of analysis yourself anyway, that begs the question: How do you compute the proper trading activity gain for reporting purposes?
If, as some people moan, one looks at the beginning balance and the ending balance and then figure the difference if their profit... That's a kin to any other business doing the same slip-shod accounting work. Let's take a doctor's office just for an example. Do you think that the doctor can fire his accountant and just compare the bank account balance at beginning of year and end of year to figure that the net (after some adjustments, no doubt) is the profit? Not by a long shot!
If you are an investor, the law puts a burden on you to properly account for your capital gains, don't do that and IRS has the right to tax you on the gross sales proceeds. I've seen it done, and it just gets messier the more the taxpayer digs his heels in while resisting the IRS's implementation of the law as passed by the US Congress.
Assuming you are not an investor, but are in the business of trading, the law puts a much higher standard on you. You must maintain books and records is a business-like manner and operate as a business in an ordinary and necessary way. Fail to maintain appropriate books and records and you run the risk of losing your trader status, and defaulting back to an investor status.
All the above said - overall reasonableness comes into play. If you had 10,000 sales and a net trading gain of $5,000 for the year and trader expenses of $2,000 for the year... who cares!
On the other hand if 10,000 sales transactions result in a 7 figure profit each year, along with significant offsetting tax deductions, then it should behoove the taxpayer to make sure he is in full regulatory compliance.
Treat the business of trading with a casual disregard by not maintaining good books and records and run the risk that noncompliance brings.
I use Captools accounting software to calculate and print my schedule D-1. I import my buy sell transactions into captools and let the program take care of the numbers and printing. It takes Captools about a hour to crunch all of the numbers before it is ready to print the schedule D-1 realized gains and losses. I have been using Captools for several years. I have several accounts and Captools keeps track of them and keeps them balanced to the penny. After several years, the account balances still balance to the penny against what is being reported by my brokers (I know my brokers back office accounting is correct). I would not trade if I did not have this or similar software.
these IRS guys are so damn ridiculous.....they have no clue.....
they just get some hair up their asses and go chargin' without
thinkin'.....
I've been using summaries for 30 years due to my heavy
trading.....maybe I'll just send those idiots all my confirms......
what they need to do is go after all the OPTIONS traders
offshore whose trades are not reported to the IRS......
they just get some hair up their asses and go chargin' without
thinkin'.....
I've been using summaries for 30 years due to my heavy
trading.....maybe I'll just send those idiots all my confirms......
what they need to do is go after all the OPTIONS traders
offshore whose trades are not reported to the IRS......