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TAX question, help !
- Thread starter uniafly
- Start date
I will only say oldtrader is right and you are wrong. In fact the irs set out new rules to clarify what they want last year. Your professional advice is not so professional it seems.Quote from Scalpomatic:
Thanks for the advice Old Trader, but I politely disagree. I've had several accountants over the years and they've all advised me the same way. Here's the part of Schedule D that allows me to do things a little differently (and more simply) than you have suggested:
page D6
SPECIFIC INSTRUCTIONS
Lines 1 and 8
You must enter the details of each transaction on a separate line of Schedule D. If you have more than five transactions to report on line 1 or line 8, you can report the additional transactions on Schedule D-1. Instead of reporting your transactions on Schedules D and D-1, you can report them on an attached statement containing all the same information as schedules D and D-1 and in a similar format.
***
So, from what my last 4 tax preparers have told me, that last line is crucial. It says you don't have to report them on Schedules D and D-1, you can "report them on an attached statement containing all the same information as Schedules D and D-1 and in a similar format." All I do each year is make sure to keep copies of my 1099b forms, and I print out an Excel spreadsheet of my account history available from my broker (which satifies the "similar format" showing buys, sells, commissions, SEC fees, etc). It's that simple. The important thing is to keep a copy for yourself. I just leave a copy on file with my accountant, and keep a copy for myself at home. If the IRS wants to audit me, they can. They will simply see a mound of paperwork that accurately reflects my trading for the year, and they can spend the hours crunching the numbers if they want.
My suggestion to someone new at figuring out daytrading taxes -- don't try to do it by yourself. Get advice from several professional tax consultants. Don't rely on one opinion, and definitely don't take advice from me or anyone else here. Pay the extra $200 to $400 a year to get the services of a pro. If your daytrading doesn't net you the type of profits that make hiring an accountant realistic, then maybe daytrading isn't for you. Just my two cents.
And again, Old Trader, I respectfully disagree with you. Maybe I'm on my way to Federal prison from playing "IRS roulette" as you call it. But if I end up in prison, I'm taking at least 4 accountants with me!
--Scalpo
Quote from vhehn:
I will only say oldtrader is right and you are wrong. In fact the irs set out new rules to clarify what they want last year. Your professional advice is not so professional it seems.
Okay, I don't mind being wrong. If Old Trader is right, and the 4 accountants I have been using are all wrong, then maybe I should seek some new accountants. I'm really glad we are having this discussion -- I like learning knew things, and it's helping me generate new questions for my accountant.
If my accountant and I incorrectly submitted my 2006 tax return, ultimately the IRS will kick back my return and request more information if they have a problem with it. As for IRS fines, they are always a possibility. And let's face it, the IRS can audit any one of us any time they like, and no matter how perfect we think our taxes have been documented, the IRS can screw us. That is a sad fact of life, but it shouldn't keep people from trading. I know...I have been audited before (previous post mentions the $17,000 in back taxes and fines the IRS claimed I owed them).
Again, I say the bottom line is this: if someone is new at crunching their daytrading taxes, they would likely be better off spending a couple hundred dollars hiring an accountant to help them. There is no way I would use TurboTax on my own, especially not for the first year of calculating daytrade taxes.
Please don't get your tax advice from strangers here at this forum. Pay the $$$ and consult a pro. Take it from someone who has been audited -- you will sleep better at night knowing there is an accounting firm between you and the IRS. Using an accountant won't make you bulletproof, but can you imagine being 100% on your own when you get audited?
--Scalpo
Quote from letsrun:
I have a few trading accounts with different brokers, one of the annoying ones is Ameritrade, they sent me the 1099 form and a list of the transactions, missing the year before's (2005) buys and resulting in a net profit of over 30K.
Please explain what you mean in the quote above.
Did Ameritrade send you a 2006 1099 showing sales in 2006 of purchases made in 2005 or did they send you a revised 1099 for 2005, as well as a 1099 for 2006?
Jack
Quote from JackR:
Please explain what you mean in the quote above.
Did Ameritrade send you a 2006 1099 showing sales in 2006 of purchases made in 2005 or did they send you a revised 1099 for 2005, as well as a 1099 for 2006?
Jack
It's the first one you stated; Ameritrade sent a 2006 1099 showing sales in 2006 of purchases made in 2005, and not showing the purchases.
Say I bought 100 amd in 2005 @ 20$ = 2000$
and sold 100 amd in 2006 @ 30$ =3000$
the total sales submitted would be 3000$ and the total gain submitted would be 3000$
whereby in reality the profit was only 1000$
so now the IRS thinks I made 3000$
All brokerages submit only the 1099 total sales number to the IRS. You prepare the Schedule D.
Brokerages, at this time, do not submit your basis in an individual equity, nor do they submit the net sales price when you sell. They provide the aggregated total of all sales made in your account.
You provide the detail via the Schedule D. The long term and short term breakdown numbers are determined by you from your records.
The IRS computer matches the 1099 Gross proceeds to the total sales on your Schedule D.
The Treasury (IRS) has been trying to get Congress to change the law so that they can require brokerages to furnish both sides of any transaction. Brokerages have been pushing back as they claim they don't always have both sides due to transfers between firms, deposits of securities by their customers, increases in shares due to taxable stock dividends and no knowledge of whether taxes were paid on the dividends, options exercise, etc., etc.
Anyway - You enter the purchase date and cost on a Schedule D you prepare. The Ameritrade Schedule D is just an "extra" provided by them. For someone who is flat at the start of the year the Ameritrade generated Schedule D is perfect. In your case it isn't.
To answer your question - attach both the IB D-1 and the Schedule D-1 you prepare for Ameritrade. Carry their numbers to the Schedule D and show their totals on the D.
Jack
Brokerages, at this time, do not submit your basis in an individual equity, nor do they submit the net sales price when you sell. They provide the aggregated total of all sales made in your account.
You provide the detail via the Schedule D. The long term and short term breakdown numbers are determined by you from your records.
The IRS computer matches the 1099 Gross proceeds to the total sales on your Schedule D.
The Treasury (IRS) has been trying to get Congress to change the law so that they can require brokerages to furnish both sides of any transaction. Brokerages have been pushing back as they claim they don't always have both sides due to transfers between firms, deposits of securities by their customers, increases in shares due to taxable stock dividends and no knowledge of whether taxes were paid on the dividends, options exercise, etc., etc.
Anyway - You enter the purchase date and cost on a Schedule D you prepare. The Ameritrade Schedule D is just an "extra" provided by them. For someone who is flat at the start of the year the Ameritrade generated Schedule D is perfect. In your case it isn't.
To answer your question - attach both the IB D-1 and the Schedule D-1 you prepare for Ameritrade. Carry their numbers to the Schedule D and show their totals on the D.
Jack
Since the IRS has no idea how much you paid for things there is no way they "think you made $3000". You tell them how much you paid - they only know how much you sold it for (aggregated).Quote from letsrun:
It's the first one you stated; Ameritrade sent a 2006 1099 showing sales in 2006 of purchases made in 2005, and not showing the purchases.
Say I bought 100 amd in 2005 @ 20$ = 2000$
and sold 100 amd in 2006 @ 30$ =3000$
the total sales submitted would be 3000$ and the total gain submitted would be 3000$
whereby in reality the profit was only 1000$
so now the IRS thinks I made 3000$
Any "buy" information that was included on the 1099 was for your information only, the IRS did not get that (and it clearly says that on that part of the 1099 if you read it).
You can get your basis for purchase transactions that occurred in 2005 by using the search history feature on Ameritrades site.