Trading tax software for last minute filers

I've been using Tradelog(TL) for about three years. My primary broker is IB. Everybody knows that IB never changes their TWS more than two or three dozen times a year. TL publishes changes as often as necessary to keep up.

TL has simplified the update process since I first started using it. I admit it might be difficult to use for a very very bright person, but for a simple guy like me it always works. Maybe there is a problem with a virus protection package or firewall program that causes the problem reported in this thread. Who knows?

When I had a problem having to do with my year-end close out the tech support person said he couldn't help and transferred me to Dave. Problem was very quickly resolved - my fault.

I do have one problem with TL - in my opinion they charge too much for the yearly renewal but it's my option to renew, I'm not forced into it.

Jack
 
Quote from tradelog:

The problem with this approach is that you are relying on Fidelity to accurately calculate your cost basis and wash sales, which has proven over and over again to be incorrect.
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Your scaring me. So, are the wash-sale snap shots I provided from Fidelity(pg 5) and how they are reported in TurboTax Sch. D(pg. 6) figured correctly?

Jeffrey
 
All I can say is in many cases the Fidelity reports are way off and you have no way of knowing this for sure because there are no proper accounting procedures in Turbotax to verify this when usiing Fidelity and TurboTax by themselves. Every tax season we go through this with our users who complain that TradeLog does not match what Fidelity has for Gain or Loss. We then have to prove it to them that we calculated it right. But this is not just Fidelity, we see this across the board with most brokers.

You may get lucky where yours is OK. But the more open positions you have, the more trades you have, and the more stock splits and mergers you have, the greater the chance of the broker reports being wrong. These are static reports and there is no way for them to edit them!

You may want to take note of the big disclaimer on most broker provided P&L statements where they warn you NOT to use them for taxes.
 
I don't know why you and the website even mention P/L statements and how they are wrong. They have nothing to do with doing taxes.

TurboTax does not download P/L statements, or data. And as you note, everyone knows they are not to be used for filing tax data.

Now I understand why you run into traders with problems. Traders attempt using their P/L statements to do their taxes.

Jeffrey
 
I believe TurboTax gets their data from the broker 1099 which does not always list trades in exact order of execution, does not have your positions carried over from last year cost basis, does not adjust for stock splits, etc.

In addition the 1099 does not calculate wash sales. In the case of Fidelity they provide the P&L statement in the 1099 and this may be what is being imported, but I cannot be sure as TurboTax is not our software. All I know is that there are many areas of concern because you are not importing the raw buys and sells and not using a program with advanced trade matching and editing capabilities like TradeLog do the proper trade accounting along with a proper verification process.

We did a test with 2 active trader accounts at Fidelity and got terrible results with no clear direction on what is wrong or how to fix things. See our white paper entitled "Popular Tax Programs and the Active Trader" - http://www.armencomp.com/Tax Programs and the Active Trader.pdf

In addition most users who import into TurboTax will compare their results to the broker P&L and if they match have a false sense of security. Please note that in all of this there is NO CLEAR DIRECTION on how to verify your results to make sure they are accurate.

Fidelity's own warning on their 1099 states "Cost Basis, realized gain and loss, and holding period information reported may not reflect all adjustments necessary for tax reporting purposes. This information is not reported to the IRS. It is provided for your assistance in tax return preparation." Most other brokers provide a similar statement. I even spoke a tax manager of one brokerage firm who caters to active traders and is responsible for every 1099 that goes out the door, and they told me that they wish they cold make this statement even stronger and get rid of the P&L because of what I just stated above.

I do not write this as a scare tactic. My main purpose is to educate traders about the many complexities when attempting to file a proper schedule d and also follow the IRS wash sale rules. If you want coroboration of these facts, please contact a CPA firm who specializes in trader taxes such as www.greencompany.com.

The main problem I face in this industry is a ton of mis-information on the web by individual traders who do not understand these complexities and brokerage firms who provide no clear guidance on this subject. A high percentage of our users (when I say high I mean maybe 10%) purchase our software because they are being audited. Since ultimately you, the taxpayer, are responsible for your return, it is better to be safe than sorry.
 
Quote from Jeffrey:

INow I understand why you run into traders with problems. Traders attempt using their P/L statements to do their taxes.
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PS: This is another misconception that you can simply take the broker provided P&L statment and attach that to your schedule d. I have seen such suggestions on many active trader forums and it is plain wrong.
 
Quote from tradelog:

One last comment: Anyone who thinks this is a painless procedure with no muss, no fuss needs to carefully read this page on Fidelity's web site entitled:

"Import Your Fidelity Tax Information into Your TurboTax® Return"
http://personal.fidelity.com/planning/tax/content/importturbotax.shtml.cvsr
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You are making it sound complicated.

1. Don’t download before February 1 2008 because of third party delays.

2. Read the section “Import Your 1099 and Cost Basis Information” (see snap shot attached) of to understand the tax information that will be downloaded into TurboTax. You do not need to read the instructions to download tax related data on Fidelity.

3. Initiated from TurboTax, download Fidelity tax related data. TurboTax makes it a simple click yes/no process. It will let you know if there is missing cost basis information.(Unusual) If there is it will bring you to that transaction with missing information, and you enter it manually.

Then through a verification process TurboTax asks, in my case 16% of the transactions asking if it is a double entry. I said “NO” to everything.

Now, match the Sch D total short-term and long-term loss/gain with Fidelity tax records(1099’s) mailed to you, or go to the website, open and compare with the corrected brokerage 1099.

I filed my taxes in March and received a direct deposit refund from Ca in 5 days, and 10 days for the Federal refund.

I did with TurboTax everything in the pdf that is said can’t be done. http://www.armencomp.com/Tax Prog...ve Trader.pdf
 

Attachments

I was talking to a TurboTax agent and found out that they have a team specializing in this area and working with the specific brokerage from their list. They are continually making improvements or fixing problems.

When your pdf was made it may be a correct reflection of that specific time you made the pdf.

It usually only takes them a week to fix a problem.

Jeffrey
 
Now, match the Sch D total short-term and long-term loss/gain with Fidelity tax records(1099’s) mailed to you, or go to the website, open and compare with the corrected brokerage 1099.
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Jeffery, this is exactly where we have seen problems and I will try to break this down:

The Short-Term and Long-Term Realized Gain/Loss shown on the 1099 is the same as the online P&L statement which has been shown to be wrong with many of our users. It is also NOT sent to the IRS. The only number the IRS concerns themselves with is your 1099 Gross Proceeds (Total Sales) figure. You MUST report at least this amount, but there are several reasons why you might report a larger number on your schedule d, such as when you have sales proceeds from options, or open short sales from last year which are not included in the 1099 gross proceeds figure.

Trade Matching Problems
One area of concern is how your buys and sells have been matched. When you are missing the cost basis in your tax program for some of your sales, that means that there was some problem matching a sale with the proper buy. And we have found that it is not always due to an open position from last year as our white paper has shown. Since your tax program does not list the individual buy/sell transactions it becomes a nightmare for you to figure out what is wrong.

Here is an interesting statement from the Fidelity page I referenced: "Customers should verify the cost basis information provided by Fidelity against their own records when determining the appropriate cost basis to be used when calculating gains and losses for tax reporting purposes." I am sure you do not want to get out each monthly statement and then try to manually match what you traded to see if it matches with what Fidelity or your tax software reported. Since TradeLog maintains the original buy/sell transactions, problems like this are much easier to spot and fix if things are wrong.

Editing Problems
Another problem is there is no way to unmatch them and rematch them properly if they were matched wrong in the first place by your broker or by your tax software. Your tax program is then taking this matched list as Gospel.

TradeLog has an open position (trade matching) verification process and a nice 1099 Reconciliation report that makes all of this quite easy: http://www.armencomp.com/tradelog/quick-start.html#verify

Wash Sale Problems
When one or more trades have not being matched properly it now adds the additional complication that your wash sales may not be computed properly, which are also fed to your tax program and taken verbatim. Please note that it is NOT your tax software that calculates wash sales. It is your broker data that is feeding this info and not all brokers calculate wash sales.

You also need to consider this: Once you add or edit the cost basis of some trades in your tax program, you have overridden the wash sale calculations made by Fidelity. Proper cost basis MUST be calculated FIRST in order to properly calculate wash sales.

For example, if you have 10 sales that are missing cost basis, and you look up and enter the correct basis, you may end up with a few trades at a loss and you may have repurchased the same stock or an option on the same stock and triggered a wash sale. And for traders who trade options, Fildeity does not calculate wash sales between stocks and options or between different options on the same unlderyling security as per IRS requirements.

So as you can see, eveything is not as easy as you might think. We have been doing this for 8 years and have seen such problems over and over again. Our only wish is to educate traders in proper trade accounting and tax reporting procedures, and to keep them out of trouble with the IRS.
 
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