Wash sale: what tools to use? what to do with the broker's 1099-B form?

M

mikep7co

Hi

I have read this other thread about wash sales (https://www.elitetrader.com/et/threads/wash-sales.315868/).
I have some additional questions about concrete, practical solutions and I did not want to clutter the other thread.

I understand the wash sale rule and I am looking for some concrete options on how to deal with it.
(I have read the following page over and over and I highly recommend it to anybody who wants to understand the subject (http://www.tradelogsoftware.com/resources/wash-sales/))

First of all, if I use only one brokerage account, is there any broker that follows the wash sale rule properly, adjusting the cost basis as it should be, etc?

If not, I am ok using a third party software.
In that case, I have identified two tools: TradeLog and GainsKeeper.
Do you have any (other) recommendation?

Concretely, when using one of those tools, what does that exactly mean when filling my taxes?
Do I have to manually log my trades in these tools on a daily basis along the year?
Do these tools generate new tax forms (1099-B?) at the end of the year to use when filing taxes?
What do I do with the incorrect 1099-B form received by my broker? Do I just ignore it and do not use it to fill my taxes?

Finally, if I have to use one of those tools, I'd like one that is well integrated with a broker and tax preparation software to reduce the manual work in importing data.
Do you know any combination of broker / tax preparation software (TurboTax?, TaxAct?) / trader log software (TradeLog?, GainsKeeper?) that work well altogether?

I am new to active trading and any insights on how more experience people concretely deal with this will be greatly appreciated. :)

Thanks
Mike
 
mikep7co said:
Hi

I have read this other thread about wash sales (https://www.elitetrader.com/et/threads/wash-sales.315868/).
I have some additional questions about concrete, practical solutions and I did not want to clutter the other thread.

I understand the wash sale rule and I am looking for some concrete options on how to deal with it.
(I have read the following page over and over and I highly recommend it to anybody who wants to understand the subject (http://www.tradelogsoftware.com/resources/wash-sales/))

First of all, if I use only one brokerage account, is there any broker that follows the wash sale rule properly, adjusting the cost basis as it should be, etc?

If not, I am ok using a third party software.
In that case, I have identified two tools: TradeLog and GainsKeeper.
Do you have any (other) recommendation?

Concretely, when using one of those tools, what does that exactly mean when filling my taxes?
Do I have to manually log my trades in these tools on a daily basis along the year?
Do these tools generate new tax forms (1099-B?) at the end of the year to use when filing taxes?
What do I do with the incorrect 1099-B form received by my broker? Do I just ignore it and do not use it to fill my taxes?

Finally, if I have to use one of those tools, I'd like one that is well integrated with a broker and tax preparation software to reduce the manual work in importing data.
Do you know any combination of broker / tax preparation software (TurboTax?, TaxAct?) / trader log software (TradeLog?, GainsKeeper?) that work well altogether?

I am new to active trading and any insights on how more experience people concretely deal with this will be greatly appreciated. :)

Thanks
Mike
More...

For the most brokers I use & the TurboTax software the following formula stands:
Proceeds - Cost Basis + Wash Sale Disallowed = Realized Gain/Loss.
 
Mike,

Just stay away from trading an instrument you're carrying a net loss on for the entire month of December. There, you're done because you waited 30 days before the end of the year, having no trading vehicle through which to carry the loss forward into the next year. Keeping an accounting track of a running wash sale throughout the year is meaningless to the gubmint. All they care about IS THE LAST WASH SALE WHICH CAN CARRY OVER TO THE NEW TAX YEAR.

For example, if I traded a stock in and out 100 times during the year, I would simply record on the tax schedule the individual gains and losses. Why? Because I am 100% guaranteed to not have a net wash sale outcome because I didn't trade that stock in December.

Yeah, you can still trade in December but then you'll have to not trade it in January for whatever amount of days add up to 30 since you last traded it in December but I wouldn't do this because you're better off freeing yourself up to trade said instrument for all of January, an historically great month to trade.
 
gkishot said:
For the most brokers I use & the TurboTax software the following formula stands:
Proceeds - Cost Basis + Wash Sale Disallowed = Realized Gain/Loss.
More...
So you're keeping track of the wash sale disallowed on your own?
Do you still import your 1099-B forms into TurboTax? If yes, how/at what time do you adjust your basis?
 
SteveH said:
Mike,

Just stay away from trading an instrument you're carrying a net loss on for the entire month of December. There, you're done because you waited 30 days before the end of the year, having no trading vehicle through which to carry the loss forward into the next year. Keeping an accounting track of a running wash sale throughout the year is meaningless to the gubmint. All they care about IS THE LAST WASH SALE WHICH CAN CARRY OVER TO THE NEW TAX YEAR.

For example, if I traded a stock in and out 100 times during the year, I would simply record on the tax schedule the individual gains and losses. Why? Because I am 100% guaranteed to not have a net wash sale outcome because I didn't trade that stock in December.

Yeah, you can still trade in December but then you'll have to not trade it in January for whatever amount of days add up to 30 since you last traded it in December but I wouldn't do this because you're better off freeing yourself up to trade said instrument for all of January, an historically great month to trade.
More...
Hum, will the 1099-B from your broker not show wash sales and therefore will not count the losses? Do you have to make the adjustment manually when filing your taxes?
Unless the broker will make the adjustment automatically on the last trade if you have not traded it for 30 days?
 
mikep7co said:
So you're keeping track of the wash sale disallowed on your own?
Do you still import your 1099-B forms into TurboTax? If yes, how/at what time do you adjust your basis?
More...
No, I don't track wash sale disallowed on my own. I trust my broker to do so. No, I don't adjust my basis. As I said, my brokers forms and the Turbotax are in agreement & are reconciled with each other.
Does the formula stand on your brokers forms?
 
gkishot said:
No, I don't track wash sale disallowed on my own. I trust my broker to do so. No, I don't adjust my basis. As I said, my brokers forms and the Turbotax are in agreement & are reconciled with each other.
Does the formula stand on your brokers forms?
More...
I am not sure to understand. Everything I read stands that brokers won't track the wash sales correctly.
What are your brokers?
So your brokers detect wash sales and carry the loss to the last trade by adjusting the cost basis appropriately?
 
mikep7co said:
I am not sure to understand. Everything I read stands that brokers won't track the wash sales correctly.
What are your brokers?
So your brokers detect wash sales and carry the loss to the last trade by adjusting the cost basis appropriately?
More...
Yes, the broker's 1099B summary agrees with the turbo tax calculations based on the formula mentioned above.
If you use IB, it should be no problem.

What are your numbers from 1099B?
 
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